<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
POST EFFECTIVE AMENDMENT NO. 4
TO REGISTRATION STATEMENT NO. 33-48701
Under
The Securities Act of 1933
IDS Life Insurance Company
(Exact name of registrant as specified in charter)
Minnesota
(State or other jurisdiction of incorporation or organization)
63
___________________________________________________________________
(Primary Standard Industrial Classification Code Number)
41-0823832
___________________________________________________________________
(I.R.S. Employer Identification No.)
IDS Tower 10, Minneapolis, MN 55440-0010
(612) 671-3131
___________________________________________________________________
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Mary Ellyn Minenko, Counsel
IDS Life Insurance Company
IDS Tower 10, Minneapolis, Minnesota 55440-0534
(612) 671-3678
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
It is proposed that this filing become effective on May 1, 1995.
If any of the Securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box. [X]
<PAGE>
PAGE 2
<TABLE><CAPTION>
Calculation of Registration Fee
____________________________________________________________________________________________________________________________
Proposed
Title of each class Proposed maximum
of securities to be Amount to be maximum offering aggregate offering Amount of
registered registered price per unit price registration fee
____________________________________________________________________________________________________________________________
<S> <C>
Interests in the Fixed N/A
Account of the Group,
Unallocated Fixed/Variable
Annuity Contracts for
Qualified Retirement
Plans
</TABLE>
<PAGE>
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IDS LIFE INSURANCE COMPANY
Registration Statement on Form S-1
Cross-Reference Sheet
Pursuant to Regulation S-K, Item 501(b)
<TABLE><CAPTION>
Form S-1 Item Number and Caption Located in Prospectus;
Caption
<S> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus......................Outside Front Cover
2. Inside Front and Outside Back
Cover Pages of Prospectus.....................Table of Contents
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges.......................................Summary or, as to ratio
of earnings to fixed
charges,
Not Applicable
4. Use of Proceeds...............................The variable accounts;
The fixed account
5. Determination of Offering Price...............Not Applicable
6. Dilution......................................Not Applicable
7. Selling Security Holders......................Not Applicable
8. Plan of Distribution..........................Distribution of Contracts
9. Description of Securities to Be
Registered....................................The variable accounts;
The fixed account
10. Interests of Named Experts and
Counsel.......................................Not Applicable
11. Information with Respect to the
Registrant....................................About IDS Life;
Additional Information
about IDS Life
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities...............................See Item 14 in Part II
/TABLE
<PAGE>
PAGE 4
PART I.
INFORMATION REQUIRED IN PROSPECTUS
Attached hereto and made a part hereof is the Prospectus dated
May 1, 1995.
<PAGE>
PAGE 5
IDS Life Group Variable Annuity Contract
Prospectus
May 1, 1995
The Group Variable Annuity Contract is a group, unallocated
deferred fixed/variable annuity contract (the contract) offered by
IDS Life Insurance Company (IDS Life) a subsidiary of American
Express Financial Corporation. This contract is designed to fund
employer group retirement plans (the plans) that qualify as
retirement programs under Sections 401 (including 401(k)) and 457
of the Internal Revenue Code of 1986, as amended (the Code). The
contracts provide for the accumulation of values on a fixed and/or
variable basis. Retirement payments are made on a fixed basis.
IDS Life Accounts F, IZ, JZ, G, H and N
Sold by: IDS Life Insurance Company, IDS Tower 10 Minneapolis, MN
55440-0010 Telephone: 612-671-3131.
THIS PROSPECTUS CONTAINS THE INFORMATION ABOUT THE VARIABLE
ACCOUNTS THAT YOU SHOULD KNOW BEFORE INVESTING. Refer to "The
variable accounts" in this prospectus.
THE PROSPECTUS IS ACCOMPANIED OR PRECEDED BY THE RETIREMENT ANNUITY
MUTUAL FUND PROSPECTUS FOR IDS LIFE AGGRESSIVE GROWTH FUND, IDS
LIFE INTERNATIONAL EQUITY FUND, IDS LIFE CAPITAL RESOURCE FUND, IDS
LIFE MANAGED FUND, INC., IDS LIFE SPECIAL INCOME FUND, INC. AND IDS
LIFE MONEYSHARE FUND, INC. PLEASE KEEP THESE PROSPECTUSES FOR
FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
IDS LIFE IS NOT A FINANCIAL INSTITUTION, AND THE SECURITIES IT
OFFERS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY FINANCIAL INSTITUTION NOR ARE THEY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER AGENCY.
A Statement of Additional Information (SAI) dated May 1, 1995
(incorporated by reference into this prospectus) has been filed
with the Securities and Exchange Commission (SEC), and is available
without charge by contacting IDS Life at the telephone number above
or by completing and sending the order form on the last page of
this prospectus. The table of contents of the SAI is on the last
page of this prospectus.
<PAGE>
PAGE 6
Table of Contents
Key terms....................................................... 3
The Group Variable Annuity Contract in brief.................... 5
Expense summary................................................. 8
Condensed financial information................................. 10
Financial statements............................................ 12
Performance information......................................... 13
The variable accounts........................................... 15
The funds....................................................... 16
Aggressive Growth Fund..................................... 16
International Equity Fund.................................. 16
Capital Resource Fund...................................... 16
Managed Fund............................................... 16
Special Income Fund........................................ 16
Moneyshare Fund............................................ 17
The fixed account............................................... 18
Buying the annuity.............................................. 19
How to make purchase payments............................... 20
Charges......................................................... 21
Contract administrative charge............................. 21
Mortality and expense risk fee............................. 21
Withdrawal charge.......................................... 22
Premium taxes.............................................. 23
Valuing the investment.......................................... 24
Number of units............................................ 24
Accumulation unit value.................................... 24
Net investment factor...................................... 25
Factors that affect variable account
accumulation units......................................... 25
Making the most of your annuity................................. 26
Transferring money between accounts........................ 26
How to request a transfer or a withdrawal.................. 26
Cash withdrawals, loans and conversions......................... 27
Withdrawal policies........................................ 27
Loans...................................................... 28
Receiving payout when the owner requests a withdrawal...... 28
Conversions................................................ 29
Special withdrawal provisions...............................29
Changing ownership.............................................. 30
Contract transfer, termination and market value adjustment...... 31
The annuity payout period....................................... 35
Annuity payout plans....................................... 35
Taxes........................................................... 37
Voting rights................................................... 40
Substitution.................................................... 41
Other contractual provisions.................................... 42
Distribution of contracts....................................... 44
Recordkeeper.................................................... 45
Additional information about IDS Life........................... 46
Directors and executive officers................................ 55
Executive compensation.......................................... 57
Security ownership of management................................ 58
Legal proceedings and opinion................................... 59
Experts......................................................... 60
Appendix........................................................ 61<PAGE>
PAGE 7
IDS Life financial information.................................. 62
About IDS Life.................................................. 79
Periodic reports................................................ 80
Table of contents of the Statement of Additional Information.... 80
<PAGE>
PAGE 8
Key terms
These terms can help you understand details about your annuity.
Annuity - A contract purchased from an insurance company that
offers tax-deferred growth of the investment until earnings are
withdrawn.
Accumulation unit - A measure of the value of each variable account
before annuity payouts begin.
Annuity payouts - A fixed amount paid at regular intervals to a
payee.
Close of business - When the New York Stock Exchange (NYSE) closes,
normally 3:00 p.m. Central Time.
Code - Internal Revenue Code of 1986, as amended.
Contract anniversary - An anniversary of the effective date of this
contract.
Contract value - The total value of your annuity before any
applicable withdrawal charge, market value adjustment, contract
administrative charge or any other applicable charge have been
deducted.
Contract year - A period of 12 months, starting on the effective
date of your contract and on each anniversary of the effective
date.
Fixed account - An account to which you may allocate purchase
payments. Amounts allocated to this account earn interest at rates
that are declared periodically by IDS Life.
IDS Life - In this prospectus, "we," "us," "our," and "IDS Life"
refer to IDS Life Insurance Company.
Mutual funds (funds) - Six IDS Life Retirement Annuity mutual
funds, each with a different investment objective. (See "The
funds.") You may allocate your purchase payments into variable
accounts investing in shares of any or all of these funds.
<PAGE>
PAGE 9
Owner (you, your) - The plan sponsor or trustee of the Plan.
Participant - An eligible employee or other person who is entitled
to benefits under the plan.
Plan - The retirement plan under which the contract is issued and
which meets the requirements of Code Sections 401 (including
401(k)) or 457.
Purchase payments - Payments made to IDS Life for an annuity.
Retirement date - The date when a participant's annuity payouts are
scheduled to begin.
Valuation date - Any normal business day, Monday through Friday,
that the New York Stock Exchange is open. The value of each
variable account is calculated at the close of business on each
valuation date.
Valuation period - The interval of time commencing at the close of
business on each valuation date and ending at the close of business
on the next valuation date. Close of business is normally 3 p.m.
(Central time).
Variable accounts - Six separate accounts to which you may allocate
purchase payments; each invests in shares of one mutual fund. (See
"The variable accounts.") The value of your investment in each
variable account changes with the performance of the particular
fund.
Withdrawal charge - A deferred sales charge that may be applied if
the owner takes a total or partial withdrawal or the contract is
transferred or terminated.
The Group Variable Annuity Contract in brief
Purpose: The Group Variable Annuity Contract is used for plans
that meet the requirements of Code sections 401 (including 401(k))
and 457.
Accounts: The owner can elect to have contract values accumulate
in any or all of:
o six variable accounts, each of which invests in mutual funds
with a particular investment objective. The value of each
variable account varies with the performance of the
particular fund. We cannot guarantee that the value at the
retirement date will equal or exceed the total of purchase
payments allocated to the variable accounts. (p.15)
o one fixed account, which earns interest at rates that are
adjusted periodically by IDS Life. (p.18)
Buying the annuity: A financial advisor will help the owner
complete and submit an application. Applications are subject to
acceptance at our Minneapolis office. Generally, payments may be<PAGE>
PAGE 10
made annually, semiannually, quarterly or monthly or on any other
frequency we accept. (p.19)
Transfers: Subject to certain restrictions the owner may
redistribute investments among accounts without charge at any time
while the contract is in force. (p.26)
Cash Withdrawals, Loans and Conversions: The owner may withdraw
all or part of the contract's value at any time. Withdrawals may
be subject to charges and tax penalties and may have tax
consequences. Total withdrawals may be subject to a market value
adjustment. (p.27)
The owner also may request a withdrawal for the purpose of funding
loans for participants. A withdrawal for a loan is not subject to
withdrawal charges. However, we reserve the right to deduct
withdrawal charges from the remaining contract value to the extent
of any unpaid loans at the time of a total withdrawal of contract
value or at contract transfer or termination. (p.28)
If a participant terminates employment, the owner may direct us to
withdraw a part of the contract value so that the participant can
purchase an individual deferred annuity contract from us. No
withdrawal charges will apply at the time of withdrawal for this
conversion. (p.29)
Contract Transfer, Termination and Market Value Adjustment: The
owner may direct us to withdraw the total contract value and
transfer that value to another funding agent. (p.31)
Under certain circumstances, we may terminate the contract. (p.33)
If the value of the fixed account is canceled due to total
withdrawal, contract transfer or contract termination, a market
value adjustment may be imposed in addition to applicable contract
charges. The amount of the market value adjustment approximates
the gain or loss resulting from our sale of assets purchased by the
purchase payments. (p.33)
Annuity payouts: The owner can direct us to begin retirement
payouts to a payee under an annuity payout plan that begins on the
participant's retirement date. The owner may choose from a variety
of plans, or the owner and IDS Life can mutually agree on other
payout arrangements. The annuity payout plan selected must meet
the requirements of the plan. Payouts will be made on a fixed
basis. (p.35)
Taxes: Generally there is no federal income tax to participants on
contributions to the contract made by the owner or on increases in
the contract's value until distributions are made. (Under certain
circumstances, tax penalties and other tax consequences may apply.)
IDS Life is taxed as a life insurance company under the Code. The
income and capital gains of the variable accounts, to the extent
applied to increase reserves under the contract, are not taxable to
IDS Life. (p.37)
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PAGE 11
Charges - The Group Variable Annuity Contract is subject to a $125
per quarter ($500 annual) contract administrative charge. We
reserve the right to increase this charge, but it will never exceed
$1,000 per year. We also deduct a 1% mortality and expense risk
charge and a withdrawal charge. Currently there are no premium
taxes under this contract, but certain state and local governments
may impose premium taxes when the owner selects an annuity payout
plan. (p.21)
Changing ownership - In general, ownership of the contract may not
be transferred. (p.30)
Prohibited investments - The owner will not offer under the plan as
a funding vehicle to which future contributions may be made: (1)
guaranteed investment contracts; (2) bank investment contracts; (3)
annuity contracts; or (4) funding vehicles providing a guarantee of
principal. (p.42)
Recordkeeper - Any person or entity authorized by the owner to
administer recordkeeping services for the plan and participants
must be approved by IDS Life. (p.45)
Expense summary
The purpose of this summary is to help the owner understand the
various costs and expenses associated with the Group Variable
Annuity Contract.
There is no sales charge when the owner purchases the annuity. All
costs that the owner bears directly or indirectly for the variable
accounts and underlying mutual funds are shown below. Some
expenses may vary as explained under "Contract charges."
Direct charges. These are deducted directly from the contract
value. They include:
Withdrawal charge: 6% of the amount withdrawn in the first two
contract years and reduced by 1% per year thereafter; no withdrawal
charge in the eighth and later contract years.
Annual contract administrative charge: $500 ($125 per quarter).
Indirect charges. The variable account pays these expenses out of
its assets. They are reflected in the variable account's daily
accumulation unit value and are not charged directly to the
account. They include:
Mortality and expense risk fee: 1% per year, deducted from the
variable account as a percentage of the average daily net assets of
the underlying fund.
Operating expenses of underlying mutual funds: management fees and
other expenses deducted as a percentage of average net assets as
follows:
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<TABLE><CAPTION>
Aggressive International Capital Special
Growth Equity Resource Managed IncomeMoneyshare
<S> <C> <C> <C> <C> <C> <C>
Management fees .64% .89% .64% .64% .64% .54%
Otherexpenses .04 .16 .04 .04 .04 .02
Total* .68% 1.05% .68% .68% .68% .56%
* Annualized operating expenses of underlying mutual funds at Dec.
31, 1994.
Aggressive International Capital Special
Growth Equity Resource Managed IncomeMoneyshare
Example:* The owner would pay the following expenses on a $1,000
investment, assuming 5% annual return and withdrawal at the end of
each time period:
1 year $ 82.68 $ 86.25 $ 82.68 $ 82.68 $ 82.68$ 81.53
3 years 119.15 129.98 119.15 119.15 119.15 115.62
5 years 145.59 164.06 145.59 145.59 145.59 139.53
10 years 239.02 277.44 239.02 239.02 239.02 226.26
The owner would pay the following expenses on the same investment
assuming no withdrawal or selection of an annuity payout plan at
the end of each time period:
1 year $ 20.94 $ 24.73 $ 20.94 $ 20.94 $ 20.94 $ 19.71
3 years 64.67 76.09 64.67 64.67 64.67 60.94
5 years 110.97 130.08 110.97 110.97 110.97 104.71
10 years 239.02 277.44 239.02 239.02 239.02 226.26
</TABLE>
This example should not be considered a representation of past or
future expenses. Actual expenses may be more or less than those
shown.
* In this example, the $500 annual contract administrative charge
is approximated as a .363% charge based on our average contract
size.
Condensed financial information
(unaudited)
The following tables give per-unit information about the financial
history of each variable account.
<PAGE>
PAGE 13
<TABLE><CAPTION>
Years Ended Dec. 31,
______________________________________________________________________________________
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
______________________________________________________________________________________________________________________
Account F (investing in shares of Capital Resource Fund)
Accumulation unit value at
beginning of period.......... $4.93 $4.82 $4.67 $3.22 $3.23 $2.57 $2.31 $2.07 $1.92 $1.52
______________________________________________________________________________________________________________________
Accumulation unit value at
end of period................ $4.94 $4.93 $4.82 $4.67 $3.22 $3.23 $2.57 $2.31 $2.07 $1.92
______________________________________________________________________________________________________________________
Number of accumulation units
outstanding at end of period
(000 omitted)................ 576,724 488,632 402,977 309,984 242,767 204,645 186,639 180,907 148,626 112,2981
______________________________________________________________________________________________________________________
Ratio of operating expense to
average net assets........... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
______________________________________________________________________________________________________________________
Account IZ2 (investing in shares of International Equity Fund)
Accumulation unit value at
beginning of period.......... $1.29 $0.98 $1.00 - - - - - - -
______________________________________________________________________________________________________________________
Accumulation unit value at
end of period................ $1.25 $1.29 $0.98 - - - - - - -
______________________________________________________________________________________________________________________
Number of accumulation units
outstanding at end of period
(000 omitted)................ 913,364 405,536 69,874 - - - - - - -
______________________________________________________________________________________________________________________
Ratio of operating expense to
average net assets........... 1.00% 1.00% 1.00% - - - - - - -
______________________________________________________________________________________________________________________
Account JZ3 (investing in shares of Aggressive Growth Fund)
Accumulation unit value at
beginning of period.......... $1.21 $1.08 $1.00 - - - - - - -
______________________________________________________________________________________________________________________
Accumulation unit value at
end of period................ $1.12 $1.21 $1.08 - - - - - - -
______________________________________________________________________________________________________________________
Number of accumulation units
outstanding at end of period
(000 omitted)................ 780,423 347,336 115,574 - - - - - - -
______________________________________________________________________________________________________________________
Ratio of operating expense to
average net assets........... 1.00% 1.00% 1.00% - - - - - - -
______________________________________________________________________________________________________________________
Account G (investing in shares of Special Income Fund)
Accumulation unit value at
beginning of period.......... $3.99 $3.48 $3.21 $2.76 $2.67 $2.48 $2.27 $2.27 $1.93 $1.59
______________________________________________________________________________________________________________________
Accumulation unit value at
end of period................ $3.80 $3.99 $3.48 $3.21 $2.76 $2.67 $2.48 $2.27 $2.27 $1.93
______________________________________________________________________________________________________________________
Number of accumulation units
outstanding at end of period
(000 omitted)................ 361,640 405,429 330,000 270,858 236,926 222,248 175,878 170,241 156,811 93,0544
______________________________________________________________________________________________________________________
Ratio of operating expense to
average net assets........... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
______________________________________________________________________________________________________________________<PAGE>
PAGE 14
Account H (investing in shares of Moneyshare Fund)
Accumulation unit value at
beginning of period.......... $2.12 $2.09 $2.04 $1.95 $1.82 $1.69 $1.59 $1.51 $1.43 $1.34
_______________________________________________________________________________________________________________________
Accumulation unit value at
end of period................ $2.18 $2.12 $2.09 $2.04 $1.95 $1.82 $1.69 $1.59 $1.51 $1.43
_______________________________________________________________________________________________________________________
Number of accumulation units
outstanding at end of period
(000 omitted)................ 84,475 74,935 102,277 126,489 139,005 108,690 63,005 51,578 38,126 42,7475
_______________________________________________________________________________________________________________________
Ratio of operating expense to
average net assets........... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
_______________________________________________________________________________________________________________________
Simple yield6 4.16% 1.89% 1.76% 3.26% 6.25% 6.81% 7.30% 5.72% 4.14% 6.39%
_______________________________________________________________________________________________________________________
Compound yield6 4.24% 1.90% 1.77% 3.31% 6.44% 7.04% 7.57% 5.88% 4.22% 6.59%
_______________________________________________________________________________________________________________________
Account N7 (investing in shares of Managed Fund)
Accumulation unit value at
beginning of period........... $2.21 $1.98 $1.86 $1.45 $1.42 $1.14 $1.06 $1.01 $1.00 -
_______________________________________________________________________________________________________________________
Accumulation unit value at
end of period................ $2.09 $2.21 $1.98 $1.86 $1.45 $1.42 $1.14 $1.06 $1.01 -
_______________________________________________________________________________________________________________________
Number of accumulation units
outstanding at end of period
(000 omitted)................ 1,127,834 910,254 650,797 496,554 400,961 331,315 325,918 321,395 101,678 -
_______________________________________________________________________________________________________________________
Ratio of operating expense to
average net assets........... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% -
_______________________________________________________________________________________________________________________
1Account F includes 17,665,211 accumulation units issued in the merger of Account C into Account F on Dec. 13, 1985.
2Account IZ commenced operations on Jan. 13, 1992.
3Account JZ commenced operations on Jan. 13, 1992.
4Account G includes 23,659,421 accumulation units issued in the merger of Account D into Account G on Dec. 13, 1985.
5Account H includes 17,002,551 accumulation units issued in the merger of Account E into Account H on Dec. 13, 1985.
6Net of annual contract administrative charge and mortality and expense risk fee.
7Account N commenced operations on April 30, 1986.
</TABLE> <PAGE>
PAGE 15
Financial statements
The SAI dated May 1, 1995 contains:
o complete audited financial statements of the variable
accounts including:
- statements of net assets as of Dec. 31, 1994;
- statements of operations for the year ended Dec. 31, 1994;
and
- statements of changes in net assets for the years ended
Dec. 31, 1994 and Dec. 31, 1993.
This prospectus contains:
o complete audited financial statements for IDS Life including:
- consolidated balance sheets as of Dec. 31, 1994 and Dec.
31, 1993; and
- related consolidated statements of income and cash flows
for each of three years in the period ended Dec. 31, 1994.
Performance information
Performance information for the variable accounts may appear from
time to time in advertisements or sales literature. In all cases,
such information reflects the performance of a hypothetical
investment in a particular account during a particular time period.
Calculations are performed as follows:
Simple yield - Account H (investing in Moneyshare Fund): Income
over a given seven-day period (not counting any change in the
capital value of the investment) is annualized (multiplied by 52)
by assuming that the same income is received for 52 weeks. This
annual income is then stated as an annual percentage return on the
investment.
Compound yield - Account H: Calculated like simple yield, except
that, when annualized, the income is assumed to be reinvested.
Compounding of reinvested returns increases the yield as compared
to a simple yield.
Yield - Account G (investing in Special Income): Net investment
income (income less expenses) per accumulation unit during a given
30-day period is divided by the value of the unit on the last day
of the period. The result is converted to an annual percentage.
Average annual total return: Expressed as an average annual
compounded rate of return of a hypothetical investment over a
period of one, five and 10 years (or up to the life of the account
if it is less than 10 years old). This figure reflects deduction
of all applicable charges, including the contract administrative
charge, mortality and expense risk fee and withdrawal charge,
assuming a withdrawal at the end of the illustrated period.
Optional total return quotations may be made that do not reflect a
withdrawal charge deduction (assuming no withdrawal).
<PAGE>
PAGE 16
Aggregate total return: Represents the cumulative change in the
value of an investment over a specified period of time (reflecting
change in an account's accumulation unit value). The calculation
assumes reinvestment of investment earnings. Aggregate total
return may be shown by means of schedules, charts or graphs.
Performance information should be considered in light of the
investment objectives and policies, characteristics and quality of
the fund in which the account invests, and the market conditions
during the given time period. Such information is not intended to
indicate future performance. Because advertised yields and total
return figures include all charges attributable to the annuity,
which has the effect of decreasing advertised performance, account
performance should not be compared to that of mutual funds that
sell their shares directly to the public. (See the SAI for a
further description of methods used to determine yield and total
return for the accounts.)
If you would like additional information about actual performance,
contact your financial advisor.
The variable accounts
Purchase payments can be allocated to any or all of the variable
accounts that invest in shares of the following funds:
IDS Life Account Established
Aggressive Growth Fund JZ Sept. 20, 1991
International Equity Fund IZ Sept. 20, 1991
Capital Resource Fund F May 13, 1981
Managed Fund N April 12, 1985
Special Income Fund G May 13, 1981
Moneyshare Fund H May 13, 1981
Each variable account meets the definition of a separate account
under federal securities laws. Income, capital gains and capital
losses of each account are credited or charged to that account
alone. No variable account will be charged with liabilities of any
other account or of our general business. Each variable account's
net assets are held in relation to the contracts described in this
prospectus as well as other variable annuity contracts that we
issue that are not described in this prospectus. All obligations
arising under the contracts are general obligations of IDS Life.
All variable accounts were established under Minnesota law and are
registered together as a single unit investment trust under the
Investment Company Act of 1940 (the 1940 Act). This registration
does not involve any supervision of our management or investment
practices and policies by the SEC.
<PAGE>
PAGE 17
The funds
Aggressive Growth Fund
Objective: capital appreciation. Invests primarily in common stock
of small- and medium-size companies. The fund also may invest in
warrants or debt securities or in large well-established companies
when the portfolio manager believes such investments offer the best
opportunity for capital appreciation.
International Equity Fund
Objective: capital appreciation. Invests primarily in common stock
of foreign issuers and foreign securities convertible into common
stock. The fund also may invest in certain international bonds if
the portfolio manager believes they have a greater potential for
capital appreciation than equities.
Capital Resource Fund
Objective: capital appreciation. Invests primarily in U.S. common
stocks listed on national securities exchanges and other securities
convertible into common stock, diversified over many different
companies in a variety of industries.
Managed Fund
Objective: maximum total investment return. Invests primarily in
U.S. common stocks listed on national securities exchanges,
securities convertible into common stock, warrants, fixed income
securities (primarily high-quality corporate bonds) and
money-market instruments. The fund invests in many different
companies in a variety of industries.
Special Income Fund
Objective: to provide a high level of current income while
conserving the value of the investment for the longest time period.
Invests primarily in high-quality, lower-risk corporate bonds
issued by many different companies in a variety of industries, and
in government bonds.
Moneyshare Fund
Objective: maximum current income consistent with liquidity and
conservation of capital. Invests in high-quality money market
securities with remaining maturities of 13 months or less. The
fund also will maintain a dollar-weighted average portfolio
maturity not exceeding 90 days. The fund attempts to maintain a
constant net asset value of $1 per share.
The Internal Revenue Service (IRS) has issued final regulations
relating to the diversification requirements under Section 817(h)
of the Code. Each mutual fund intends to comply with these
requirements.
The U.S. Treasury and the IRS have indicated they may provide
additional guidance concerning how many variable accounts may be
offered and how many exchanges among variable accounts may be
allowed before the owner is considered to have investment control
and thus is currently taxed on income earned within variable
account assets. We do not know at this time what
the additional guidance will be or when action will be taken. We<PAGE>
PAGE 18
reserve the right to modify the contract, as necessary, to ensure
that the owner will not be subject to current taxation as the owner
of the variable account assets.
We intend to comply with all federal tax laws to ensure that the
contract continues to qualify as an annuity for federal income tax
purposes. We reserve the right to modify the contract as necessary
to comply with any new tax laws.
IDS Life is the investment adviser for each of the funds. IDS Life
cannot guarantee that the funds will meet their investment
objectives. Please read the Retirement Annuity Mutual Fund
prospectus for complete information on investment risks,
deductions, expenses and other facts the owner should know before
investing. It is available by contacting IDS Life at the address
or telephone number on the front of this publication, or from your
financial advisor.
The fixed account
Purchase payments can also be allocated to the fixed account. The
cash value of the fixed account increases as interest is credited
to the account. Purchase payments and transfers to the fixed
account become part of the general account of IDS Life, the
company's main portfolio of investments. Interest is credited
daily and compounded annually. We may change the interest rates
from time to time.
In addition, a market value adjustment is imposed on the fixed
account if the owner cancels the value of the fixed account due to
total withdrawal, contract transfer or contract termination. The
amount of the market value adjustment approximates the gain or loss
resulting from sale by IDS Life of assets purchased with purchase
payments. (See "Market value adjustment.")
Because of exemptive and exclusionary provisions, interests in the
fixed account have not been registered under the Securities Act of
1933 (1933 Act), nor is the fixed account registered as an
investment company under the 1940 Act. Accordingly, neither the
fixed account nor any interests in it are generally subject to the
provisions of the 1933 or 1940 Acts, and we have been advised that
the staff of the SEC has not reviewed the disclosures in this
prospectus that relate to the fixed account. Disclosures regarding
the fixed account, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to
the accuracy and completeness of statements made in prospectuses.
Buying the annuity
A financial advisor will help the owner prepare and submit an
application, and send it along with the initial purchase payment to
our Minneapolis office.
When applying, the owner can select
o the account(s) in which to invest<PAGE>
PAGE 19
o how to make purchase payments
If the application is complete, we will process it and apply the
purchase payments to the account(s) within two days after we
receive it. If the application is accepted, we will send the owner
a contract. If we cannot accept the application within five days,
we will decline it and return the payment unless the parties agree
otherwise. We will credit additional purchase payments to the
contract's account(s) at the next close of business.
How to make purchase payments
1 By letter
Send the check along with the plan name and account number to:
Regular mail:
IDS Life Insurance Company
P.O. Box 74
Minneapolis, MN 55440-0074
Express mail:
IDS Life Insurance Company
733 Marquette Avenue
Minneapolis, MN 55402
2 By scheduled payment plan
A financial advisor can help set up:
o participant salary reduction
Charges
Contract administrative charge
This fee is for establishing and maintaining records. We deduct
$125 from the contract value at the end of each contract quarter
(each three-month period measured from the effective date of the
contract or, if earlier, when contract value is totally withdrawn
or the contract is transferred or terminated). We deduct this
charge on a pro-rata basis from the fixed and variable accounts.
Annual charge: $500. We reserve the right to increase the
contract administrative charge in the future, but we guarantee that
it will never exceed $250 per quarter ($1,000 per year).
Mortality and expense risk fee
This fee is to cover the mortality risk and expense risk and is
applied daily to the variable accounts and reflected in the unit
values of the accounts. The variable accounts pay this fee at the
time that dividends are distributed from the funds in which they
invest. Annually the fee totals 1% of the variable accounts'
average daily net assets. Approximately two-thirds of this amount
is for our assumption of mortality risk, and one-third is for our<PAGE>
PAGE 20
assumption of expense risk. This fee does not apply to the fixed
account.
Mortality risk arises because of our guarantee to make annuity
payouts according to the terms of the contract, no matter how long
a specific participant lives and no matter how long the entire
group of IDS Life annuitants live.
If, as a group, IDS Life annuitants outlive the life expectancy we
have assumed in our actuarial tables, then we must take money from
our general assets to meet our obligations. If, as a group, IDS
Life annuitants do not live as long as expected, we could profit
from the mortality risk fee.
Expense risk arises because the contract administrative charge
cannot be increased above $1,000 per year and may not cover our
expenses. Any deficit would have to be made up from our general
assets. We could profit from the expense risk fee if the annual
contract administrative charge is more than sufficient to meet
expenses.
We do not plan to profit from the contract administrative charge.
However, we do hope to profit from the mortality and expense risk
fee. We may use any profits realized from this fee for any proper
corporate purpose, including, among others, payment of distribution
(selling) expenses. We do not expect that the withdrawal charge,
discussed in the following paragraphs, will cover sales and
distribution expenses.
Withdrawal charge
If the owner withdraws part or all of the contract, a withdrawal
charge may apply. This withdrawal charge represents a percentage
of the amount withdrawn as follows:
Withdrawal charge as
percentage of amount
Contract year: withdrawn:
__________________________________________________________________
1 6%
2 6
3 5
4 4
5 3
6 2
7 1
8 and later 0
_________________________________________________________________
In the case of partial withdrawal, the withdrawal charge is
deducted from the contract value remaining after the owner is paid
the amount requested.<PAGE>
PAGE 21
Example of withdrawal charge:
Owner requests $1,000 partial withdrawal and the withdrawal
charge is 5%:
$1,000 partial withdrawal = $1,052.63
.95
Total amount withdrawn...............$1,052.63
x 0.05
Total withdrawal charge..............$ 52.63
There are no withdrawal charges for withdrawals on behalf of a
participant if the participant:
o attains age 59 1/2;
o purchases an immediate annuity under the annuity payout
plans of this contract after separation from service;
o retires under the plan after age 55;
o becomes disabled (as defined by the Code);
o dies;
o encounters financial hardship as permitted under the plan
and the Code;
o receives a loan as requested by the owner;
o converts contract value to an individual retirement annuity
or other qualified annuity offered by IDS life as requested
by the owner.
Under no circumstance will withdrawal charges exceed 8.5% of
aggregate purchase payments made.
Possible group reductions: In some cases lower sales and
administrative expenses may be incurred or we may perform fewer
services. In such cases, we may be able to reduce or eliminate
certain contract charges. However, we expect this to occur
infrequently.
Premium taxes
Currently, there are no premium taxes under this contract.
However, a charge will be made by IDS Life against the contract
value for any state and local premium taxes to the extent the taxes
are payable in connection with the purchase of an annuity contract
under the annuity payout plans.
Valuing the investment
Here is how the accounts are valued:
Fixed account: The amounts allocated to the fixed account are
valued directly in dollars and equal the sum of the purchase
payments, plus interest earned, less any amounts withdrawn or
transferred.
Variable accounts: Amounts allocated to the variable accounts are
converted into accumulation units. Each time the owner makes a<PAGE>
PAGE 22
purchase payment or transfers amounts into one of the variable
accounts, a certain number of accumulation units are credited to
the contract for that account. Conversely, each time the owner
takes a partial withdrawal, transfers amounts out of a variable
account, or is assessed a contract administrative charge, a certain
number of accumulation units are subtracted from the contract.
The accumulation units are the true measure of investment value in
each account during the accumulation period. They are related to,
but not the same as, the net asset value of the underlying fund.
The dollar value of each accumulation unit can rise or fall daily
depending on the performance of the underlying mutual fund and on
certain fund expenses. Here is how unit values are calculated:
Number of units
To calculate the number of accumulation units for a particular
account, we divide the investment by the current accumulation unit
value.
Accumulation unit value
The current accumulation unit value for each variable account
equals the last value times the account's current net investment
factor.
Net investment factor
o Determined each business day by adding the underlying mutual
fund's current net asset value per share, plus per share amount
of any current dividend or capital gain distribution; then
o dividing that sum by the previous net asset value per share; and
o subtracting the percentage factor representing the mortality and
expense risk fee from the result.
Because the net asset value of the underlying mutual fund may
fluctuate, the accumulation unit value may increase or decrease.
The owner bears this investment risk in a variable account.
Factors that affect variable account accumulation units
Accumulation units may change in two ways; in number and in value.
Here are the factors that influence those changes:
The number of accumulation units owned may fluctuate due to:
o additional purchase payments allocated to the variable
account(s);
o transfers into or out of the variable account(s);
o partial withdrawals;
o withdrawal charges; and/or
o contract administrative charges.
Accumulation unit values may fluctuate due to:
o changes in underlying mutual fund(s) net asset value;
o dividends distributed to the variable account(s);
o capital gains or losses of underlying mutual funds;
o mutual fund operating expenses; and/or
o mortality and expense risk fees.<PAGE>
PAGE 23
Making the most of the annuity
Transferring money between accounts
The owner may transfer money from one account, including the fixed
account, to another before the annuity payouts begin. If we
receive the request before the close of business, we will process
it that day. Requests received after the close of business will be
processed the next business day. There is no charge for transfers.
Before making a transfer, the owner should consider the risks
involved in switching investments.
We may suspend or modify transfer privileges at any time. Any
restriction imposed by the plan will apply. (For information on
transfers after annuity payouts begin, see "The annuity payout
period.")
How to request a transfer or a withdrawal
A transfer or withdrawal request can be made by letter or we can
agree to another method. Send the plan name, account number,
Social Security Number or Taxpayer Identification Number and signed
request for a transfer or withdrawal to:
Regular mail:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
Express mail:
IDS Life Insurance Company
733 Marquette Avenue
Minneapolis, MN 55402
Cash withdrawals, loans and conversions
As owner, you may withdraw all or part of the annuity contract
value at any time by sending a written request or by any other
method we accept. For total withdrawals, we will compute the value
of the contract at the close of business after we receive the
request. We may ask the owner to return the contract. The owner
may have to pay withdrawal charges (see "Charges") and IRS taxes
and penalties (see "Taxes").
Withdrawal policies
o If the owner requests a total withdrawal, payment will equal the
total contract value less the contract administrative charge, any
applicable premium tax and withdrawal charge.
o The owner or the recordkeeper must state the reason for a
partial withdrawal.
o If the contract has a balance in more than one account and
request for a partial withdrawal is made, we will withdraw money
from all the accounts in the same proportion as the value in each
account correlates to the total contract value, unless requested
otherwise.
<PAGE>
PAGE 24
o For total withdrawals from the fixed account, a market value
adjustment may apply. (See "Contract transfer, termination and
market value adjustment" below.)
Loans
The owner may request withdrawals for the purpose of funding loans
for participants. At the time of the loan request, the owner must
specify from which accounts the withdrawal for the loan should be
made. The amount and terms of the loan must be in accordance with
the applicable requirements of the plan and the Code. IDS Life
assumes no responsibility for the validity of the loan or whether
the loan complies with such applicable requirements.
Withdrawals for the purpose of funding a loan under the plan will
not be subject to withdrawal charges when the loan is made.
However, we reserve the right to deduct any such withdrawal charges
from the remaining contract value to the extent of any unpaid loans
at the time of a total withdrawal of the contract value or at
contract transfer or termination. (See "Charges.")
Receiving payout when the owner requests a withdrawal
By regular or express mail
o Payable to owner
o Normally mailed to address of record within seven days after
receiving the request. However, we may postpone the payout if:
-the withdrawal amount includes a purchase payment check that
has not cleared
-the NYSE is closed, except for normal holiday and weekend
closings
-trading on the NYSE is restricted, according to SEC rules
-an emergency, as defined by SEC rules, makes it impractical
to sell securities or value the net assets of the accounts
-the SEC permits us to delay payment for the protection of
security holders
Special withdrawal provisions
o The rights of any person to any benefits under the plans under
which these contracts are issued will be subject to the terms and
conditions of the plans themselves, regardless of the terms and
conditions of the contract issued in connection with the plans.
o IDS Life reserves the right to defer the payment of amounts
withdrawn from the fixed account for a period not to exceed six
months from the date we receive the request for withdrawal.
o Since contracts offered will be issued in connection with plans
that meet the requirements of Code Sections 401 (including 401(k))
and 457, reference should be made to the terms of the particular
plan for any further limitations or restrictions on cash
withdrawals.
<PAGE>
PAGE 25
o A withdrawal charge will be deducted from the amount withdrawn
subject to certain limitations and exceptions. (See "Charges.") A
cash withdrawal is also subject to federal income taxes and may
incur federal tax penalties. The tax consequences of a cash
withdrawal payment should be carefully considered. (See "Taxes.")
Conversion
In the event of a participant's termination of employment or for
other reasons that meet the requirements of the plan and the Code
and which are acceptable to us, the owner may elect to transfer, on
the participant's behalf, part of the contract value to an
individual deferred annuity contract then offered by IDS Life.
This individual contract will be qualified as an individual
retirement annuity under Section 408 or will qualify under other
applicable sections of the Code. Such contract will be in a form
then customarily issued by us for business under such qualified
plans. No withdrawal charges will apply at the time of such
conversion.
Changing ownership
Ownership of the contract may not be transferred except to:
o a trustee or successor trustee of a pension or profit
sharing trust that is qualified under the Code; or
o as otherwise permitted by laws and regulations governing
the plans under which the contract is issued.
Subject to the provisions above, the contract may not be sold,
assigned, transferred, discounted or pledged as collateral for a
loan or as security for the performance of an obligation or for any
other purpose to any person except IDS Life.
Contract transfer, termination and market value adjustment
Withdrawals by owner for transfer of funds
The owner may direct IDS Life to withdraw the total contract value
and transfer that value to another funding agent. All applicable
contract charges including withdrawal charges will be payable by
the owner and will be deducted from the first payout unless the
total contract value is transferred to a plan offered by IDS Life
or its affiliates. (See "Charges.")
The owner must provide IDS Life with a written request to make such
a withdrawal. This written request must be sent to our Minneapolis
office and must specify the initial withdrawal date and payee to
whom the payouts are to be made.
At the owner's option, we will pay the contract value less any
applicable charges in annual installments or in a lump sum as
follows:
1. The contract value may be paid in five annual installments
beginning on the initial withdrawal date and then on each of the <PAGE>
PAGE 26
next four anniversaries of such date as follows:
% of Then Remaining
Installment Payment Contract Value Balance
1 20%
2 25
3 33
4 50
5 100
No additional withdrawals for benefits or other transfers of
contract values will be allowed and no additional purchase payments
will be accepted after the first withdrawal payment is made. We
will continue to credit interest to any contract value balance
remaining after an installment payment at the interest crediting
rate then in effect for the fixed account.
2. The contract value may be paid in a lump sum. Any amount
attributable to the fixed account value will be based on the market
value of such balance. The market value will be determined by us
by applying the formula described below under "Market value
adjustment." We will make lump sum payments according to the
provisions of the above section titled "Receiving a payment when
the owner requests a withdrawal."
Market value adjustment - A market value adjustment (MVA) applies
only when we pay out the fixed account value in a lump sum when:
o the owner withdraws the total contract value to transfer that
value to another funding vehicle;
o the owner makes a total withdrawal of the fixed account contract
value; or
o we terminate the contract as described below. (See "Contract
termination.")
The MVA will be applied to the amount being withdrawn from the
fixed account after deduction of any applicable contract
administrative charge and withdrawal charge. (See "Charges.")
The MVA will reflect the relationship between the current interest
rate being credited to new purchase payments allocated to the fixed
account and the rate being credited to all prior purchase payments.
The MVA is calculated as follows:
MVA = fixed account value x (A - B) x C
Where:
A = the weighted average interest rate (in decimal form) being
credited to all fixed account purchase payments made by the
owner at the time of termination, rounded to 4 decimal
places;
<PAGE>
PAGE 27
B = the interest rate (in decimal form) being credited to new
purchase payments to the contract at the time of termination
or total withdrawal, rounded to 4 decimal places; and
C = the annuity factor, which represents the relationship between
the contract year and the average duration of underlying
investments from the following table:
Contract Year Annuity Factor
1-3 6.0
4-6 5.0
7+ 4.0
For an example showing an upward and downward MVA, please see
Appendix A.
No MVA applies if:
o the owner makes a partial withdrawal of the fixed account
contract value;
o installment payments are made when the owner withdraws the total
contract value to transfer that value to another funding vehicle or
we terminate the contract; or
o the owner transfers contract values from the fixed account to the
variable accounts as described above under "Transferring money
between accounts."
Contract termination
We reserve the right upon 30 days' written notice to the owner to
declare a contract termination date that will be any date on or
after the expiration of the 30-day notification period.
A contract termination date may be declared if:
o The owner adopts an amendment to the plan that causes the plan to
be materially different from the plan originally in existence when
the contract was purchased. To be "materially different," the
amendment must cause a substantial change in the level of the
dollar amounts of purchase payments or contract benefits to be paid
by us;
o The plan fails to qualify or becomes disqualified under the
appropriate sections of the Code;
o The owner offers under the plan as a funding vehicle to which
future contributions may be made a guaranteed investment contract,
bank investment contract, annuity contract or funding vehicle
providing a guarantee of principal. See "Prohibited Investments;"
or
o The owner changes to a recordkeeper that is not approved by us.
If we waive our right to terminate the contract under any provision
of this section at any time, such waiver will not be considered a <PAGE>
PAGE 28
precedent and will not prohibit us from exercising the right to
terminate this contract, for the reasons noted above, at any future
time.
Procedures at contract termination
On the contract termination date, we will withdraw any outstanding
charges, including any contract administrative charges, from the
contract value. A withdrawal charge may apply and be payable by
the owner on account of any termination under this provision and
will be deducted from the first termination payment. (See
"Charges.")
At the owner's option, we will pay the contract value in a lump sum
or in annual installment payouts according to the table under
"Withdrawals by owner for transfer of funds" above. A lump sum
payout will be subject to an applicable MVA to the fixed account
value. If the owner does not select an option, we will pay the
contract value to the owner under the installment option.
The annuity payout period
When a plan participant reaches his or her retirement date, the
owner of the contract may select one of the annuity payout plans
outlined below, or the owner and IDS Life will mutually agree on
other payout arrangements. No withdrawal charges are deducted
under the payout plans listed below.
Retirement payouts will be made on a fixed basis. We will make
these retirement payouts under a supplemental fixed immediate
annuity in the form customarily offered by us at the time of
purchase.
Annuity payout plans
The owner may choose any one of these annuity payout plans by
giving us written instructions at least 30 days before contract
values are to be used to purchase the payout plan.
o Plan A - Life annuity - no refund: Monthly payouts are made
until the annuitant's death. Payouts end with the last payout
before the annuitant's death; no further payouts will be made.
This means that if the annuitant dies after only one monthly payout
has been made, no more payouts will be made.
o Plan B - Life annuity with five, 10 or 15 years certain: Monthly
payouts are made for a guaranteed payout period of five, 10 or 15
years that the annuitant elects. This election will determine the
length of the payout period to the beneficiary if the annuitant
should die before the elected period has expired. The guaranteed
payout period is calculated from the retirement date. If the
annuitant outlives the elected guaranteed payout period, payouts
will continue until the annuitant's death.
o Plan C - Life annuity - installment refund: Monthly payouts are
made until the annuitant's death, with our guarantee that payouts
will continue for some period of time. Payouts will be made for at<PAGE>
PAGE 29
least the number of months determined by dividing the amount
applied under this option by the first monthly payout, whether or
not the annuitant is living.
o Plan D - Joint and last survivor life annuity - no refund:
Monthly payouts are made to the annuitant and a joint annuitant
while both are living. If either annuitant dies, monthly payouts
continue at the full amount until the death of the surviving
annuitant. Payouts end with the death of the second annuitant.
o Plan E - Payouts for a specified period: Monthly payouts are
made for a specific payout period of 10 to 30 years chosen by the
annuitant. Payouts will be made only for the number of years
specified whether the annuitant is living or not. Depending on the
time period selected, it is foreseeable that an annuitant can
outlive the payout period selected. In addition, a 10% IRS penalty
tax could apply under this payout plan. (See "Taxes".)
Restrictions on payout options:
Since the contract is issued in connection with plans that meet the
requirements of Code section 401 (including 401(k)) and 457, the
payout schedule must meet the applicable requirements of the
particular plan and of the Code, including the distribution and
incidental death benefit requirements. In general, the plan must
provide for retirement payouts:
o over the life of the participant;
o over the joint lives of the participant and a designated
beneficiary;
o for a period not exceeding the life expectancy of the
participant; or
o for a period not exceeding the joint life expectancies of the
participant and a designated beneficiary.
If monthly payouts would be less than $20: We will calculate the
amount of monthly payouts at the time the immediate annuity is
purchased to provide retirement payouts. If the calculations show
that monthly payouts would be less than $20, we have the right to
pay the contract value to the owner in a lump sum.
Taxes
Tax treatment of IDS Life and the variable accounts: IDS Life is
taxed as a life insurance company under the Code. Although the
operations of the variable accounts are accounted for separately
from other operations of IDS Life for purposes of federal income
taxation, the variable accounts are not taxable as entities
separate from IDS Life. Under existing federal income tax laws,
the income and capital gains of the variable accounts, to the
extent applied to increase reserves under the contracts, are not
taxable to IDS Life.
Taxation of annuities in general: Generally, there is no tax to a
participant on contributions made by the owner to the contract or
on any increases in the value of the contract. However, when <PAGE>
PAGE 30
distribution to a participant occurs, the distribution will be
subject to taxation (except contributions that were made with
after-tax dollars).
Penalties: If participants receive amounts from the contract
before reaching age 59 1/2, they may have to pay a 10% IRS penalty
on the amount includable in their ordinary income. However, this
penalty will not apply to any amount received by the participant or
designated beneficiary:
o because of the participant's death;
o because the participant becomes disabled (as defined in the
Code);
o if the distribution is part of a series of substantially
equal periodic payments, made at least annually, over the
participant's life or life expectancy (or joint lives or life
expectancies of the participant and designated beneficiary);
or
o if the participant retires under the plan after age 55.
Other penalties or exceptions may apply if distributions are made
from the annuity before the plan specifies that payouts can be
made.
Withholding: If the participant receives a distribution, mandatory
20% income tax withholding generally will be imposed at the time
the payout is made. Any withholding that is done represents a
prepayment of the participant's tax due for the year and the
participant will take credit for such amounts when filing an annual
tax return. This mandatory withholding will not be imposed if:
o instead of receiving the distribution check, the participant
elects to have the distribution rolled over directly to an
IRA or another eligible plan;
o the payout is one in a series of substantially equal periodic
payouts, made at least annually, over the participant's life
or life expectancy (or the joint lives or life expectancies
of the participant and designated beneficiary) or over a
specified period of 10 years or more; or
o the payout is a minimum distribution required under the Code.
Payouts made to a surviving spouse instead of being directly rolled
over to an IRA may also be subject to 20% income tax withholding.
Elective withholding: If the distribution is not subject to
mandatory withholding as described above, the participant can elect
not to have any withholding occur. To do this we must be provided
with a valid Social Security Number or Taxpayer Identification
Number.
If this election is not made and if the payout is part of an
annuity payout plan, the amount of withholding generally is
computed using payroll tables. Please send us a statement of how
many exemptions to use in calculating the withholding. If the
distribution is any other type of payment (such as a partial or
full withdrawal), withholding is computed using 10% of the taxable
portion.
<PAGE>
PAGE 31
Some states also impose withholding requirements similar to the
federal withholding described above. If this should be the case,
any payments from which federal withholding is deducted may also
have state withholding deducted. The withholding requirements may
differ if payment is being made to a non-U.S. citizen or if the
payment is being delivered outside the United States.
Important: Our discussion of federal tax laws is based upon our
understanding of these laws as they are currently interpreted.
Federal tax laws or current interpretations of them may change.
For this reason and because tax consequences are complex and highly
individual and cannot always be anticipated, please consult a tax
advisor regarding any questions about taxation of the annuity
contract.
Tax Qualification
The contract is intended to qualify as an annuity contract for
federal income tax purposes. To that end, the provisions of this
contract are to be interpreted to ensure or maintain such tax
qualification, notwithstanding any other provisions to the
contrary. We reserve the right to amend this contract to reflect
any clarifications that may be needed or are appropriate to
maintain such qualification or to conform this contract to any
applicable changes in the tax qualification requirements. We will
send the owner a copy of any such amendment.
Voting rights
The contract owner or other authorized party with investments in
the variable account(s) may vote on important mutual fund policies.
We will vote fund shares according to the instructions we receive.
The number of votes is determined by applying the percentage
interest in each variable account to the total number of votes
allowed to the account.
We calculate votes separately for each account not more than 60
days before a shareholders' meeting. Notice of these meetings,
proxy materials and a statement of the number of votes to which the
voter is entitled will be sent.
We will vote shares for which we have not received instructions in
the same proportion as the votes for which we have received
instructions. We also will vote the shares for which we have
voting rights in the same proportion as the votes for which we have
received instructions.
Substitution
Shares of any of the underlying funds may not always be available
for purchase by the variable accounts, or we may decide that
further investment in any such fund's shares is no longer
appropriate in view of the purposes of the variable account. In
either event, shares of another registered open-end management
investment company may be substituted both for fund shares already<PAGE>
PAGE 32
purchased by the variable account and for purchases to be made in
the future. In the event of any substitution pursuant to this
provision, we may make appropriate endorsement to the contract to
reflect the substitution.
We reserve the right to split or combine the value of accumulation
units. In effecting such change of unit values, strict equity will
be preserved and no change will have a material effect on the
benefits under the contract or on any other provisions of the
contract.
Other contractual provisions
Modification
Upon notice to the owner, the contract may be modified by IDS Life
if such modification:
o is necessary to make the contract or the variable accounts
comply with any law or regulation issued by a governmental
agency to which we or the variable accounts are subject;
o is necessary to assure continued qualification of the
contract under the Code or other federal or state laws
relating to retirement annuities or annuity contracts;
o is necessary to reflect a change in the variable accounts; or
o provides additional accumulation options for the variable
accounts.
In the event of any such modification, we may make appropriate
endorsement to the contract to reflect such modification.
Prohibited investments
While the contract is in force, and prior to any withdrawal or
contract termination, the owner will not offer under the plan as a
funding vehicle to which future contributions may be made any of
the following:
o guaranteed investment contracts;
o bank investment contracts;
o annuity contracts with fixed and/or variable accounts; or
o funding vehicles providing a guarantee of principal.
IDS Life reserves the right to terminate the contract if one or
more of these prohibited investments is offered.
Proof of condition or event
Where any payments under the contract depend on the recipient being
alive and/or being a certain age on a given date, or depend on the
occurrence of a specific event, IDS Life may require proof
satisfactory to it that such a condition has been met prior to
making the payment.
Distribution of contracts
IDS Life is the principal underwriter for the contracts. We are
registered with the SEC under the Securities and Exchange Act of
1934 (1934 Act) as a broker-dealer and are a member of the National
Association of Securities Dealers, Inc.
<PAGE>
PAGE 33
We may enter into distribution agreements with certain broker-
dealers registered under the 1934 Act. We will pay a maximum
commission of 7% for the sale of a contract. In addition, we may
pay a service commission when the owner maintains the contract in
force.
Recordkeeper
We provide a contract to fund plans that meet the requirements of
Code Sections 401 (including 401(k)) and 457. We do not provide
any administrative or recordkeeping services in connection with the
plan. We will rely on information and/or instructions provided by
the plan administrator and/or recordkeeper in order to properly
administer the contract. For this reason, any person or entity
authorized by the owner to administer recordkeeping services for
the plan and participants must be approved by IDS Life.
Additional information about IDS Life
Selected financial data
The following selected financial data for IDS Life and its
subsidiaries should be read in conjunction with the consolidated
financial statements and notes.
<TABLE><CAPTION>
Years ended Dec. 31, (Thousands)
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C>
Premiums $ 144,640 $ 127,245 $ 114,379 $ 102,338 $ 89,749
Net investment income 1,781,873 1,783,219 1,616,821 1,422,866 1,204,934
Net gain (loss) on investments (4,282) (6,737) (3,710) (5,837) 1,022
Other 384,105 304,344 240,959 198,344 165,742
Total revenues 2,306,336 2,208,071 1,968,449 1,717,711 1,461,447
Income before income taxes 512,512 412,726 315,821 259,467 227,742
Net income $ 336,169 $ 270,079 $ 211,170 $ 182,037 $ 157,748
Total assets $33,747,543 $33,057,753 $27,295,773 $22,558,809 $18,088,351
</TABLE>
Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations
Results of Operations
1994 Compared to 1993:
Consolidated net income increased 24 percent to $336 million in
1994, compared to $270 million in 1993. Earnings growth resulted
primarily from increases in spread income, policyholder and
contractholder charges, and management fees. These increases
reflect higher average insurance and annuities in force during
1994. For the full year, investment margins were comparable to
1993 levels, although investment margins for the fourth quarter of
1994 were below prior year levels. It is expected that this trend
will continue through the first half of 1995. As a result, the
growth in 1995 earnings is expected to be less than that
experienced in 1994.
Consolidated income before income taxes totaled $513 million in
1994, compared with $413 million in 1993. In 1994, $123 million
was from the life, disability income, health and long-term care <PAGE>
PAGE 34
insurance segment, compared with $104 million in 1993. In 1994,
$394 million was from the annuity segment, compared with $315
million in 1993. There was a $4.3 million net loss on investments
in 1994, compared with a net loss on investments of $6.7 million in
1993.
Total premiums received increased to $5.7 billion in 1994, compared
with $5.3 billion in 1993. This increase is primarily due to
continued strong sales of variable annuities. In addition, IDS
Life reported small increases in its fixed single premium deferred
annuity line. Universal life-type insurance and variable universal
life insurance premiums received also increased from the prior
year.
Total revenues increased to $2.3 billion in 1994, compared with
$2.2 billion in 1993. The increase is primarily due to increases
in policyholder and contractholder charges, and management fees.
Net investment income, the largest component of revenues, was
basically unchanged from the prior year, reflecting a slight
increase in total investments offset by a decrease in the rate
earned on those investments.
Policyholder and contractholder charges, which consist primarily of
cost of insurance charges on universal life-type policies,
increased 19 percent to $220 million in 1994, compared with $184
million in 1993. This increase reflects higher total life
insurance in force which grew 14 percent to $52.7 billion at
Dec. 31, 1994.
Management and other fees increased 37% to $164 million in 1994,
compared with $120 million in 1993. This is primarily due to an
increase in assets held in segregated asset accounts, which grew
21% to $10.9 billion at Dec. 31, 1994, resulting from strong sales
of variable products. IDS Life provides investment management
services for the mutual funds used as investment options for
variable annuities and variable life insurance. IDS Life also
receives a mortality and expense risk fee from the segregated asset
accounts.
Total benefits and expenses decreased slightly to $1.8 billion in
1994. The largest component of expenses, interest credited to
policyholder accounts for universal life-type insurance and
investment contracts, decreased to $1.2 billion. This is primarily
due to a decrease in interest credited rates, partially offset by
higher aggregate amounts in force.
Amortization of deferred policy acquisition costs increased to $280
million in 1994, compared with $212 million in 1993. This increase
is a result of a higher level of amortizable deferred costs and a
high level of surrenders as a result of an exchange plan announced
during the first quarter of 1994 and completed prior to the end of
1994.
Other insurance and operating expenses, which include non-
capitalized commissions and indirect selling expenses, direct and
indirect operating expenses, premium taxes and guaranty association
<PAGE>
PAGE 35
expenses decreased to $210 million in 1994, compared with $242
million in 1993. This decrease primarily reflects a decrease in
amounts accrued for future guaranty association assessments.
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan,"
and SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures," are effective Jan. 1,
1995. The new rules are not expected to have a material impact on
IDS Life's results of operations or financial condition.
1993 Compared to 1992:
Consolidated income before income taxes totaled $413 million in
1993, compared with $316 million in 1992. In 1993, $104 million
was from the life, disability income, health and long-term care
insurance segment, compared with $96 million in 1992. In 1993,
$315 million was from the annuity segment, compared with $223
million in 1992. The remaining $6.7 million loss in 1993 was a net
loss on investments, compared with a net loss on investments of
$3.7 million in 1992.
Total premiums received increased to $5.3 billion in 1993, compared
with $4.4 billion in 1992. This increase is primarily due to
strong sales of variable annuities due to the low interest rate
environment. In addition, IDS Life reported small increases in its
fixed single premium deferred annuity line. Universal life-type
insurance and variable universal life insurance premiums received
also increased from the prior year.
Total revenues increased to $2.2 billion in 1993, compared with
$2.0 billion in 1992. Of this, net investment income was $1.8
billion in 1993, compared with $1.6 billion in 1992, reflecting an
increase in invested assets. Total investments grew 14% to $21.9
billion at Dec. 31, 1993, from $19.2 billion at Dec. 31, 1992.
Policyholder and contractholder charges, which consist primarily of
cost of insurance charges on universal life-type policies,
increased 18% to $184 million in 1993, compared with $156 million
in 1992. This increase reflects higher total life insurance in
force which grew 13% to $46.1 billion at Dec. 31, 1993.
Management and other fees increased 41% to $120 million in 1993,
compared with $85 million in 1992. This is primarily due to an
increase in assets held in segregated asset accounts, which grew
45% to $9.0 billion at Dec. 31, 1993, resulting from strong sales
of variable products. IDS Life provides investment management
services for the mutual funds used as investment options for
variable annuities and variable life insurance. IDS Life also
receives a mortality and expense risk fee from the segregated asset
accounts.
Total benefits and expenses increased to $1.8 billion in 1993,
compared with $1.7 billion in 1992. The largest component of
expenses, interest credited to policyholder accounts for universal
life-type insurance and investment contracts, aggregated $1.2 <PAGE>
PAGE 36
billion and was essentially unchanged from the prior year. This
reflected interest credited to higher accumulation values offset by
lower interest credited rates.
Amortization of deferred policy acquisition costs increased to $212
million in 1993, compared with $140 million in 1992, reflecting
prior years' growth of life insurance and annuity business and a
cumulative adjustment driven by the long-term decrease in accrual
rates on fixed annuities.
Other insurance and operating expenses, which include non-
capitalized commissions and indirect selling expenses, direct and
indirect operating expenses, premium taxes and guaranty association
expenses increased to $242 million in 1993, compared with $216
million in 1992.
Risk Management
IDS Life primarily invests in fixed income securities, over a broad
range of maturities for the purpose of providing fixed annuity
clients with a competitive rate of return on their investments
while minimizing risk, and to provide a dependable and consistent
margin between the interest rate earned on investments and the
interest rate credited to clients' accounts. IDS Life does not
invest in securities to generate trading profits.
IDS Life has an investment committee that holds regularly scheduled
meetings and, when necessary, special meetings. At these meetings,
the committee reviews models projecting different interest rate
scenarios and their impact on profitability. The objective of the
committee is to structure the investment security portfolio based
upon the type and behavior of products in the liability portfolio
so as to achieve targeted levels of profitability.
Rates credited to clients' accounts are generally reset at shorter
intervals than the maturity of underlying investments. Therefore,
margins may be negatively impacted by increases in the general
level of interest rates. Part of the committee's strategy includes
the purchase of some types of derivatives, such as interest rate
caps, for hedging purposes. These derivatives protect margins by
increasing investment returns if there is a sudden and severe rise
in interest rates, thereby mitigating the impact of an increase in
rates credited to clients' accounts.
Liquidity and Capital Resources
The liquidity requirements of IDS Life are met by funds provided
from operations and investment activity. The primary components of
the funds provided are premiums, investment income, proceeds from
sales of investments as well as maturities and periodic repayments
of investment principal.
The primary uses of funds are policy benefits, commissions and
operating expenses, policy loans and new investment purchases.
IDS Life has available lines of credit with three banks aggregating
$100 million, which are used strictly as short-term sources of<PAGE>
PAGE 37
funds. Borrowings outstanding under the agreements were $nil at
Dec. 31, 1994. IDS Life also uses reverse repurchase agreements
for short-term liquidity needs. There were no reverse repurchase
agreements outstanding at Dec. 31, 1994.
At Dec. 31, 1994, investments in fixed maturities comprised 87% of
IDS Life's total invested assets. Of the fixed maturity portfolio,
approximately 47% is invested in GNMA, FNMA and FHLMC mortgage-
backed securities which are considered AAA/Aaa quality.
At Dec. 31, 1994, approximately 8.9% of IDS Life's investments in
fixed maturities were below investment grade bonds. These
investments may be subject to a higher degree of risk than the more
"traditional" issues because of the borrower's generally greater
sensitivity to adverse economic conditions, such as recession or
increasing interest rates, and in certain instances, the lack of an
active secondary market. Expected returns on below investment
grade bonds reflect consideration of such factors. IDS Life has
identified those fixed maturities for which a decline in fair value
is determined to be other than temporary, and has written them down
to fair value with a charge to earnings.
At Dec. 31, 1994, net unrealized depreciation on fixed maturities
held to maturity included $111 million of gross unrealized
appreciation and $686 million of gross unrealized depreciation.
Net unrealized depreciation on fixed maturities available for sale
included $35 million of gross unrealized appreciation and $479
million of gross unrealized depreciation.
At Dec. 31, 1994, IDS Life had an allowance for losses for mortgage
loans totaling $35 million and for real estate totaling $8 million.
The economy and other factors have caused an increase in the number
of insurance companies that are under regulatory supervision. This
circumstance has resulted in an increase in assessments by state
guaranty associations to cover losses to policyholders of insolvent
or rehabilitated companies. Some assessments can be partially
recovered through a reduction in future premium taxes in certain
states. IDS Life established an asset for guaranty association
assessments from those states allowing a reduction in future
premium taxes over a reasonable period of time. The asset will be
amortized as future premium taxes are reduced. IDS Life has also
estimated the potential effect of future assessments on IDS Life's
financial position and results of operations and has established a
reserve for such potential assessments.
In the first quarter of 1995, IDS Life paid a $70 million dividend
to its parent. In 1994, dividends paid to its parent were $165
million.
The National Association of Insurance Commissioners has established
risk-based capital standards to determine the capital requirements
of a life insurance company based upon the risks inherent in its
operations. These standards require the computation of a risk-
based capital amount which is then compared to a company's actual
total adjusted capital. The computation involves applying factors
to various statutory financial data to address four primary risks: <PAGE>
PAGE 38
asset default, adverse insurance experience, interest rate risk and
external events. These standards provide for regulatory attention
when the percentage of total adjusted capital to authorized control
level risk-based capital is below certain levels. As of Dec. 31,
1994, IDS Life's total adjusted capital was well in excess of the
levels requiring regulatory attention.
Segment Information
IDS Life's operations consist of two business segments: Individual
and group life, disability income, long-term care and health
insurance; and fixed and variable annuity products designed for
individuals, pension plans, small businesses and employer-sponsored
groups. IDS Life is not dependent upon any single customer and no
single customer accounted for more than 10% of revenue in 1994,
1993 or 1992. (See Note 10, Segment information, in the "Notes to
Consolidated Financial Statements.")
Reinsurance
Reinsurance arrangements are used to reduce exposure to large
losses. The maximum amount of risk retained by IDS Life on any one
life is $750,000 of life and waiver of premium benefits plus
$50,000 of accidental death benefits. The excesses are reinsured
with other life insurance companies. At Dec. 31, 1994, traditional
life and universal life-type insurance in force aggregated $52.7
billion, of which $3.2 billion was reinsured.
Reserves
In accordance with the insurance laws and regulations under which
IDS Life operates, it is obligated to carry on its books, as
liabilities, actuarially determined reserves to meet its
obligations on its outstanding life and health insurance policies
and annuity contracts. Reserves for policies and contracts are
based on mortality and morbidity tables in general use in the
United States. These reserves are computed amounts that, with
additions from premiums to be received, and with interest on such
reserves compounded annually at assumed rates, will be sufficient
to meet IDS Life's policy obligations at their maturities or in the
event of an insured's death. In the accompanying financial
statements these reserves are determined in accordance with
generally accepted accounting principles. (See Note 1, Liabilities
for future policy benefits, in the "Notes to Consolidated Financial
Statements.")
Investments
Of IDS Life's consolidated total investments of 22.1 billion at
Dec. 31, 1994, 41% was invested in mortgage-backed securities, 45%
in corporate and other bonds, 11% in primary mortgage loans on real
estate, 1.8% in policy loans and the remaining 1.2% in other
investments.
<PAGE>
PAGE 39
Competition
IDS Life is engaged in a business that is highly competitive due to
the large number of stock and mutual life insurance companies and
other entities marketing insurance products. There are over 2,600
stock, mutual and other types of insurers in the life insurance
business. In Fortune magazine's May 1994 listing of the 50 largest
life insurance companies as ranked by assets, IDS Life ranked 15th.
Best's Insurance Reports, Life-Health edition, 1994, assigned IDS
Life one of its highest classifications, A+ (Superior).
Employees
As of Dec. 31, 1994, IDS Life and its subsidiaries had 231
employees; including 177 employed at the corporate office in
Minneapolis, MN, and 54 employed at IDS Life Insurance Company of
New York, located in Albany, NY. The number of employees of these
companies decreased significantly in 1994 from previous years due
to a reorganization and reassignment of many employees to the
parent company, American Express Financial Corporation.
Properties
IDS Life occupies office space in Minneapolis, MN, which is rented
by its parent, American Express Financial Corporation. IDS Life
reimburses American Express Financial Corporation for rent based on
direct and indirect allocation methods. Facilities occupied by IDS
Life and our subsidiaries are believed to be adequate for the
purposes for which they are used and are well maintained.
State regulation
IDS Life is subject to the laws of the State of Minnesota governing
insurance companies and to the regulations of the Minnesota
Department of Commerce. An annual statement in the prescribed form
is filed with the Minnesota Department of Commerce each year
covering our operation for the preceding year and its financial
condition at the end of such year. Regulation by the Minnesota
Department of Commerce includes periodic examination to determine
IDS Life's contract liabilities and reserves so that the Minnesota
Department of Commerce may certify that these items are correct.
IDS Life's books and accounts are subject to review by the
Minnesota Department of Commerce at all times. Such regulation
does not, however, involve any supervision of the account's
management or IDS Life's investment practices or policies. In
addition, IDS Life is subject to regulation under the insurance
laws of other jurisdictions in which it operates. A full
examination of IDS Life's operations is conducted periodically by
the National Association of Insurance Commissioners.
Under insurance guaranty fund laws, in most states, insurers doing
business therein can be assessed up to prescribed limits for
policyholder losses incurred by insolvent companies. Most of these
laws do provide however, that an assessment may be excused or
deferred if it would threaten an insurer's own financial strength.
<PAGE>
PAGE 40
Directors and executive officers*
The directors and principal executive officers of IDS Life and the
principal occupation of each during the last five years is as
follows:
Directors
Louis C. Fornetti, 45
Director since March 1994; senior vice president and director,
American Express Financial Corporation (AEFC), since February 1985.
David R. Hubers, 52
Director since September 1989; president and chief executive
officer, AEFC, since August 1993, and director since January 1984.
Senior vice president, Finance and chief financial officer, AEFC,
from January 1984 to August 1993.
Richard W. Kling, 54
Director since February 1984; president since March 1994.
Executive vice president, Marketing and Products from January 1988
to March 1994. Senior vice president, AEFC, since May 1994.
Director of IDS Life Series Fund, Inc. and member of the board of
managers of IDS Life Variable Annuity Funds A and B.
Paul F. Kolkman, 48
Director since May 1984; executive vice president since March 1994;
vice president, Finance, from May 1984 to March 1994; vice
president, AEFC, since January 1987.
Peter A. Lefferts, 53
Director and executive vice president, Marketing, since March 1994;
senior vice president and director, AEFC, since February 1986.
Janis E. Miller, 43
Director and executive vice president, Variable Assets, since March
1994; vice president, AEFC, since June 1990. Director, Mutual
Funds Product Development and Marketing, AEFC, from May 1987 to May
1990. Director of IDS Life Series Fund, Inc. and member of the
board of managers of IDS Life Variable Annuity Funds A and B.
James A. Mitchell, 53
Chairman of the board since March 1994; director since July 1984;
chief executive officer since November 1986; president from July
1984 to March 1994; executive vice president, AEFC, since March
1994; director, AEFC, since July 1984; senior vice president, AEFC,
from July 1984 to March 1994.
Barry J. Murphy, 44
Director and executive vice president, Client Service, since March
1994; senior vice president, Operations, Travel Related Services
(TRS), a subsidiary of American Express Company, since July 1992;
vice president, TRS, from November 1989 to July 1992; chief
operating officer, TRS, from March 1988 to November 1989.
<PAGE>
PAGE 41
Stuart A. Sedlacek, 37
Director and executive vice president, Assured Assets, since March
1994; vice president, AEFC, since September 1988.
Melinda S. Urion, 41
Director and controller since September 1991; executive vice
president since March 1994; vice president and treasurer from
September 1991 to March 1994; corporate controller, AEFC, since
April 1994; vice president, AEFC, since September 1991; chief
accounting officer, AEFC, from July 1988 to September 1991.
Officers Other Than Directors
Timothy V. Bechtold, 41
Vice president, Insurance Product Development, since May 1989.
David J. Berry, 51
Vice president since October 1989.
Alan R. Dakay, 42
Vice president, Institutional Insurance Marketing, since September
1991. Vice President, Institutional Insurance Marketing, AEFC,
since May 1990.
Robert M. Elconin, 37
Vice president since March 1994.
Morris Goodwin Jr., 43
Vice president and treasurer since March 1994; vice president and
corporate treasurer, AEFC, since July 1989; chief financial officer
and treasurer, American Express Trust Company, from January 1988 to
July 1989.
Lorraine R. Hart, 43
Vice president, Investments, since March 1992; member of the
investment committee. Vice president, Investments, AEFC, since
October 1989. Vice President-Investments, IDS Certificate Company,
IDS Property Casualty Insurance Company, American Enterprise Life
Insurance Company and American Partners Life Insurance Company.
Ryan R. Larson, 44
Vice president, Annuity Product Development, since September 1983.
Vice president, IPG Product Development, AEFC, since July 1989;
qualified actuary, American Enterprise Life Insurance Company.
Mary O. Neal, 41
Vice president, Sales Support, since September 1990.
James R. Palmer, 49
Vice president, Taxes, since May 1989. Vice president, Insurance
Operations, AEFC, since February 1987.
F. Dale Simmons, 57
Vice president, Real Estate Loan Management, since November 1993.
Vice president, senior portfolio manager, Insurance Investments,
AEFC, since August 1990. Vice president and assistant treasurer,
IDS Life of New York.
<PAGE>
PAGE 42
William A. Stoltzmann, 46
Vice president, general counsel and secretary since 1985; vice
president and assistant general counsel, AEFC, since November 1985.
*The address for all of the directors and principal officers is:
IDS Tower 10, Minneapolis, MN 55440-0010.
Executive compensation
Executive officers of IDS Life also may serve one or more
affiliated companies. The following table reflects cash
compensation paid to the five most highly compensated executive
officers as a group for services rendered in 1994 to IDS Life and
its affiliates. The table also shows the total cash compensation
paid to all executive officers of IDS Life, as a group, who were
executive officers at any time during 1994.
Name of individual Cash
or number in group Position held compensation
Five most highly
compensated executive
officers as a group: $2,231,979
James A. Mitchell Chairman of the
Board and Chief
Exec. Officer
Alan R. Dakay Vice President,
Institutional Insurance
Marketing
Lorraine R. Hart Vice President,
Investments
Stuart A. Sedlacek Exec. Vice President,
Assured Assets
Peter A. Lefferts Exec. Vice President,
Marketing
All executive officers
as a group (19) $4,840,713
___________________________________________________________________
Security ownership of management
IDS Life's directors and officers do not beneficially own any
outstanding shares of stock of the company. All of the outstanding
shares of stock of IDS Life are beneficially owned by its parent,
American Express Financial Corporation. The percentage of shares
of American Express Financial Corporation owned by any director,
and by all directors and officers of IDS Life as a group, does not
exceed 1% of the class outstanding.
<PAGE>
PAGE 43
Legal proceedings and opinion
Legal matters in connection with federal laws and regulations
affecting the issue and sale of the contracts described in this
prospectus and the organization of IDS Life, its authority to issue
contracts under Minnesota law and the validity of the forms of the
contracts under Minnesota law have been passed on by the general
counsel of the IDS Life.
Experts
The consolidated financial statements of IDS Life Insurance Company
at Dec. 31, 1994 and 1993, and for each of the three years in the
period ended Dec. 31, 1994, appearing in this prospectus and
registration statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon
appearing elsewhere herein and in the registration statement, and
are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
Appendix
1. Assume: contract effective date of October 1, 1993
contract termination date of July 1, 1998
contract year at termination is 5
Purchase Initial Current Accumulation
Year Payments Rate Rate Account Value
_________________________________________________________________
1 $10,000 6.50% 6.25% $12,560
2 8,000 6.00 6.25 9,870
3 12,000 6.25 6.25 13,960
4 15,000 7.50 6.75 16,660
5 20,000 6.50 6.50 20,640
_________________________________________________________________
Total Accumulation Account Value = $73,690
Withdrawal Charge = .03 x 73,690 = 2,211
Fixed Account Value = $73,690 - 2,211 = $71,479
Weighted Average Interest Rate = 6.433%
Interest Rate on New Purchase Payments = 6.750
MVA = $71,479 x (.06433 - .06750) x 5.0 = $-1,132.94
Market Value = $ 71,479 - 1,132.94 = $70,346.06
2. Assume: contract effective date of January 15, 1994
contract termination date of September 20, 1996
contract year at termination is 3
<PAGE>
PAGE 44
Purchase Initial Current Accumulation
Year Payments Rate Rate Account Value
_________________________________________________________________
1 $15,000 7.00% 6.25% $17,710
2 20,000 6.50 6.00 22,140
3 25,000 5.50 5.50 25,910
_________________________________________________________________
Total Accumulation Account Value = $65,760
Withdrawal Charge = .05 x 65,760 = 3,288
Fixed Account Value = $65,760 - 3,288 = $62,472
Weighted Average Interest Rate = 5.870%
Interest Rate on New Purchase Payments = 5.250
MVA = $62,472 x (.05870 - .05250) x 6 = $+2,323.96
Market Value = $62,472 + 2,323.96 = $64,795.96
IDS Life financial information
The financial statements shown below are those of the insurance
company and not those of the funds or the accounts. They are
included in the prospectus for the purpose of informing investors
as to the financial condition of the insurance company and its
ability to carry out its obligations under the variable annuity
contracts.
<PAGE>
PAGE 45
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
December 31,
<TABLE><CAPTION>
ASSETS 1994 1993
(thousands)
<S> <C> <C>
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1994, $10,694,800) $11,269,861 $ -
Available for sale, at fair value (Amortized cost:
1994, $8,459,128) 8,017,555 -
Investment securities, at amortized cost (Fair value:
1993, $20,425,979) - 19,392,424
Mortgage loans on real estate
(Fair value: 1994, $2,342,520; 1993, $2,125,686) 2,400,514 2,055,450
Policy loans 381,912 350,501
Other investments 51,795 56,307
Total investments 22,121,637 21,854,682
Cash and cash equivalents 267,774 146,281
Receivables:
Reinsurance 80,304 55,298
Amounts due from brokers 7,933 5,719
Other accounts receivable 49,745 21,459
Premiums due 1,594 1,329
Total receivables 139,576 83,805
Accrued investment income 317,510 307,177
Deferred policy acquisition costs 1,865,324 1,652,384
Deferred income taxes 124,061 -
Other assets 30,426 21,730
Assets held in segregated asset
accounts, primarily common stocks
at market 10,881,235 8,991,694
Total assets $35,747,543 $33,057,753
======== ========
See accompanying notes to consolidated financial statements.<PAGE>
PAGE 46
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS (continued)
December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1994 1993
(thousands)
Liabilities:
Future policy benefits:
Fixed annuities $19,361,979 $18,492,135
Universal life-type insurance 2,896,100 2,753,455
Traditional life insurance 206,754 210,205
Disability income, health and
long-term care insurance 244,077 185,272
Policy claims and other
policyholders' funds 50,068 44,516
Deferred income taxes - 43,620
Amounts due to brokers 226,737 351,486
Other liabilities 291,902 292,024
Liabilities related to segregated
asset accounts 10,881,235 8,991,694
Total liabilities 34,158,852 31,364,407
Stockholder's equity:
Capital stock, $30 par value per share;
100,000 shares authorized, issued and outstanding 3,000 3,000
Additional paid-in capital 222,000 222,000
Net unrealized gain (loss) on investments (275,708) 114
Retained earnings 1,639,399 1,468,232
Total stockholder's equity 1,588,691 1,693,346
Total liabilities and stockholder's equity $35,747,543 $33,057,753
======== ========
Commitments and contingencies (Note 6)
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
PAGE 47
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31,
1994 1993 1992
(thousands)
<S> <C> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 48,184 $ 48,137 $ 49,719
Disability income and
long-term care insurance 96,456 79,108 64,660
Total premiums 144,640 127,245 114,379
Policyholder and contractholder
charges 219,936 184,205 156,368
Management and other fees 164,169 120,139 84,591
Net investment income 1,781,873 1,783,219 1,616,821
Net loss on investments (4,282) (6,737) (3,710)
Total revenues 2,306,336 2,208,071 1,968,449
Benefits and expenses:
Death and other benefits:
Traditional life insurance 28,263 32,136 34,139
Universal life-type insurance
and investment contracts 52,027 49,692 42,174
Disability income, health and
long-term care insurance 13,393 13,148 10,701
Increase (decrease) in liabilities for
future policy benefits:
Traditional life insurance (3,229) (4,513) (5,788)
Disability income, health and
long-term care insurance 37,912 32,528 27,172
Interest credited on universal life-type
insurance and investment contracts 1,174,985 1,218,647 1,188,379
Amortization of deferred policy
acquisition costs 280,372 211,733 140,159
Other insurance and operating expenses 210,101 241,974 215,692
Total benefits and expenses 1,793,824 1,795,345 1,652,628
Income before income taxes 512,512 412,726 315,821
Income taxes 176,343 142,647 104,651
Net income $ 336,169 $ 270,079 $ 211,170
======= ======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
PAGE 48
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
1994 1993 1992
(thousands)
Cash flows from operating activities:
Net income $ 336,169 $ 270,079 $ 211,170
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy loans, excluding universal
life-type insurance:
Issuance (37,110) (35,886) (32,881)
Repayment 33,384 29,557 26,750
Change in reinsurance receivable (25,006) (55,298) -
Change in other accounts receivable (28,286) (1,364) (4,772)
Change in accrued investment income (10,333) (22,057) (15,853)
Change in deferred policy acquisition
costs, net (192,768) (211,509) (229,252)
Change in liabilities for future policy
benefits for traditional life,
disability income, health and
long-term care insurance 55,354 79,695 21,384
Change in policy claims and other
policyholders' funds 5,552 (5,383) (1,347)
Change in deferred income taxes (19,176) (44,237) (30,385)
Change in other liabilities (122) 56,515 88,997
Amortization of premium
(accretion of discount), net 30,921 (27,438) (4,289)
Net loss on investments 4,282 6,737 3,710
Activity related to universal
life-type insurance:
Premiums 409,035 397,883 312,621
Surrenders and death benefits (290,427) (255,133) (166,162)
Interest credited to account
balances 150,955 156,885 161,873
Policyholder and contractholder
charges, non-cash (126,918) (115,140) (100,975)
Other, net (8,974) (1,907) (10,647)
Net cash provided by operating
activities $ 286,532 $ 221,999 $ 229,942
See accompanying notes to consolidated financial statements.
<PAGE>
PAGE 49
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Years ended December 31,
1994 1993 1992
(thousands)
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases $ (879,740) $ - $ -
Maturities, sinking fund payments and calls 1,651,762 - -
Sales 58,001 - -
Fixed maturities available for sale:
Purchases (2,763,278) - -
Maturities, sinking fund payments and calls 1,234,401 - -
Sales 374,564 - -
Fixed maturities:
Purchases - (6,548,852) (6,590,279)
Maturities, sinking fund payments and calls - 3,934,055 2,696,239
Sales - 487,983 1,011,093
Other investments, excluding policy loans:
Purchases (634,807) (553,694) (411,069)
Sales 243,862 123,352 67,097
Change in amounts due from brokers (2,214) 14,483 289,335
Change in amounts due to brokers (124,749) 92,832 42,182
Net cash used in investing activities (842,198) (2,449,841) (2,895,402)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 3,157,778 2,843,668 2,821,069
Surrenders and death benefits (3,311,965) (1,765,869) (1,168,633)
Interest credited to account balances 1,024,031 1,071,917 1,026,506
Universal life-type insurance policy loans:
Issuance (78,239) (70,304) (72,007)
Repayment 50,554 46,148 40,351
Capital contribution from parent - 200,000 -
Cash dividend to parent (165,000) (25,000) (20,000)
Net cash provided by financing activities 677,159 2,300,560 2,627,286
Net increase (decrease) in cash and
cash equivalents 121,493 72,718 (38,174)
Cash and cash equivalents at
beginning of year 146,281 73,563 111,737
Cash and cash equivalents at
end of year $ 267,774 $ 146,281 $ 73,563
======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
PAGE 50
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dec. 31, 1994, 1993 and 1992
($ thousands)
1. Summary of significant accounting policies
Nature of business
IDS Life Insurance Company (the Company) is engaged in the
insurance and annuity business. The Company sells various forms of
fixed and variable individual life insurance, group life insurance,
individual and group disability income insurance, long-term care
insurance, and single and installment premium fixed and variable
annuities.
Basis of presentation
The Company is a wholly owned subsidiary of American Express
Financial Corporation (formerly IDS Financial Corporation), which
is a wholly owned subsidiary of American Express Company. The
accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries, IDS Life
Insurance Company of New York, American Enterprise Life Insurance
Company and American Partners Life Insurance Company. All material
intercompany accounts and transactions have been eliminated in
consolidation.
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting
principles which vary in certain respects from reporting practices
prescribed or permitted by state insurance regulatory authorities.
Investments
As of January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under SFAS No. 115,
fixed maturities that the Company has both the positive intent and
the ability to hold to maturity are classified as held to maturity
and carried at amortized cost. All other fixed maturities and all
marketable equity securities are classified as available for sale
and carried at fair value. Unrealized gains and losses on
securities classified as available for sale are carried as a
separate component of stockholder's equity. The effect of adopting
SFAS No. 115 was to increase stockholder's equity by approximately
$181 million, net of tax, as of January 1, 1994, but the adoption
had no impact on the Company's net income.
Management determines the appropriate classification of fixed
maturities at the time of purchase and reevaluates the
classification at each balance sheet date.
<PAGE>
PAGE 51
1. Summary of significant accounting policies (continued)
Mortgage loans on real estate are carried principally at the unpaid
principal balances of the related loans. Policy loans are carried
at the aggregate of the unpaid loan balances which do not exceed
the cash surrender values of the related policies. Other
investments include interest rate caps and equity securities. When
evidence indicates a decline, which is other than temporary, in the
underlying value or earning power of individual investments, such
investments are written down to the fair value by a charge to
income. Equity securities are carried at market value and the
related net unrealized appreciation or depreciation is reported as
a credit or charge to stockholder's equity.
Realized investment gain or loss is determined on an identified
cost basis.
Prepayments are anticipated on certain investments in
mortgage-backed securities in determining the constant effective
yield used to recognize interest income. Prepayment estimates are
based on information received from brokers who deal in
mortgage-backed securities.
Statement of cash flows
The Company considers investments with a maturity at the date of
their acquisition of three months or less to be cash equivalents.
These securities are carried principally at amortized cost which
approximates fair value.
Supplementary information to the consolidated statement of cash
flows for the years ended Dec. 31 is summarized as follows:
1994 1993 1992
Cash paid during the year for:
Income taxes $226,365 $188,204 $140,445
Interest on borrowings 1,553 2,661 1,265
Recognition of profits on annuity contracts and insurance policies
The Company issues single premium deferred annuity contracts that
provide for a service fee (surrender charge) at annually decreasing
rates upon withdrawal of the annuity accumulation value by the
contract owner. No sales fee is deducted from the contract
considerations received on these contracts ("no load" annuities).
All of the Company's single premium deferred annuity contracts
provide for crediting the contract owners' accumulations at
specified rates of interest. Such rates are revised by the Company
from time to time based on changes in the market investment yield
rates for fixed-income securities.
Profits on single premium deferred annuities and installment
annuities are recognized by the Company over the lives of the
contracts and represent the excess of investment income earned from
investment of contract considerations over interest credited to
contract owners and other expenses.
<PAGE>
PAGE 52
1. Summary of significant accounting policies (continued)
The retrospective deposit method is used in accounting for
universal life-type insurance. This method recognizes profits over
the lives of the policies in proportion to the estimated gross
profits expected to be realized.
Premiums on traditional life, disability income, health and
long-term care insurance policies are recognized as revenue when
collected or due, and related benefits and expenses are associated
with premium revenue in a manner that results in recognition of
profits over the lives of the insurance policies. This association
is accomplished by means of the provision for future policy
benefits and the deferral and subsequent amortization of policy
acquisition costs.
Deferred policy acquisition costs
The costs of acquiring new business, principally sales
compensation, policy issue costs, underwriting and certain sales
expenses, have been deferred on insurance and annuity contracts.
The deferred acquisition costs for single premium deferred
annuities and installment annuities are amortized based upon
surrender charge revenue and a portion of the excess of investment
income earned from investment of the contract considerations over
the interest credited to contract owners. The costs for universal
life-type insurance are amortized over the lives of the policies as
a percentage of the estimated gross profits expected to be realized
on the policies. For traditional life, disability income, health
and long-term care insurance policies, the costs are amortized over
an appropriate period in proportion to premium revenue.
Liabilities for future policy benefits
Liabilities for universal life-type insurance, single premium
deferred annuities and installment annuities are accumulation
values.
Liabilities for fixed annuities in a benefit status are based on
the Progressive Annuity Table with interest at 5 percent, the 1971
Individual Annuity Table with interest at 7 percent or 8.25
percent, or the 1983a Table with various interest rates ranging
from 5.5 percent to 9.5 percent, depending on year of issue.
Liabilities for future benefits on traditional life insurance have
been computed principally by the net level premium method, based on
anticipated rates of mortality (approximating the 1965-1970 Select
and Ultimate Basic Table for policies issued after 1980 and the
1955-1960 Select and Ultimate Basic Table for policies issued prior
to 1981) and the 1975-1980 Select and Ultimate Basic Table for term
insurance policies issued after 1984, policy persistency derived
from Company experience data (first year rates ranging from
approximately 70 percent to 90 percent and increasing rates
thereafter), and estimated future investment yields of 4 percent
for policies issued before 1974 and 5.25 percent for policies
issued from 1974 to 1980. Cash value plans issued in 1980 and
later assume future investment rates that grade from 9.5 percent to<PAGE>
PAGE 53
1. Summary of significant accounting policies (continued)
5 percent over 20 years. Term insurance issued from 1981 to 1984
assumes an 8 percent level investment rate, term insurance issued
from 1985-1993 assumes investment rates that grade from 10 percent
to 6 percent over 20 years and term insurance issued after 1993
assumes investment rates that grade from 8.7 percent to 6.57
percent over 7 years.
Liabilities for future disability income policy benefits have been
computed principally by the net level premium method, based on the
1964 Commissioners Disability Table with the 1958 Commissioners
Standard Ordinary Mortality Table at 3 percent interest for 1980
and prior, 8 percent interest for persons disabled from 1981 to
1991, 7.7 percent interest for persons disabled in 1992 and 6
percent interest for persons disabled after 1992.
Liabilities for future benefits on long-term care insurance have
been computed principally by the net level premium method, using
morbidity rates based on the 1985 National Nursing Home Survey and
mortality rates based on the 1983a Table. The interest rate basis
is 9.5 percent grading to 7 percent over ten years for policies
issued from 1989 to 1992, 7.75 percent grading to 7 percent over
four years for policies issued after 1992, 8 percent for claims
incurred in 1989 to 1991, 7.7 percent for claims incurred in 1992
and 6.7 percent for claims incurred after 1992.
Reinsurance
The maximum amount of life insurance risk retained by the Company
on any one life is $750 of life and waiver of premium benefits plus
$50 of accidental death benefits. The maximum amount of disability
income risk retained by the Company on any one life is $6 of
monthly benefit for benefit periods longer than three years. The
excesses are reinsured with other life insurance companies on a
yearly renewable term basis. Graded premium whole life policies
and long term care are primarily reinsured on a coinsurance basis.
Federal income taxes
The Company's taxable income is included in the consolidated
federal income tax return of American Express Company. The Company
provides for income taxes on a separate return basis, except that,
under an agreement between American Express Financial Corporation
and American Express Company, tax benefit is recognized for losses
to the extent they can be used on the consolidated tax return. It
is the policy of American Express Financial Corporation and its
subsidiaries that American Express Financial Corporation will
reimburse a subsidiary for any tax benefit.
Included in other receivables at Dec. 31, 1994 is $22,034
receivable from American Express Financial Corporation for federal
income taxes. Included in other liabilities at December 31, 1993
is $14,709 payable to American Express Financial Corporation for
federal income taxes.
<PAGE>
PAGE 54
1. Summary of significant accounting policies (continued)
Segregated asset account business
The segregated asset account assets and liabilities represent funds
held for the exclusive benefit of the variable annuity and variable
life insurance contract owners. The Company receives investment
management and mortality and expense assurance fees from the
variable annuity and variable life insurance mutual funds and
segregated asset accounts. The Company also deducts a monthly cost
of insurance charge and receives a minimum death benefit guarantee
fee and issue and administrative fee from the variable life
insurance segregated asset accounts.
The Company makes contractual mortality assurances to the variable
annuity contract owners that the net assets of the segregated asset
accounts will not be affected by future variations in the actual
life expectancy experience of the annuitants and the beneficiaries
from the mortality assumptions implicit in the annuity contracts.
The Company makes periodic fund transfers to, or withdrawals from,
the segregated asset accounts for such actuarial adjustments for
variable annuities that are in the benefit payment period. The
Company guarantees, for the variable life insurance policyholders,
the contractual insurance rate and that the death benefit will
never be less than the death benefit at the date of issuance.
Reclassification
Certain 1993 and 1992 amounts have been reclassified to conform to
the 1994 presentation.
2. Investments
Fair values of investments in fixed maturities represent quoted
market prices and estimated values when quoted prices are not
available. Estimated values are determined by established
procedures involving, among other things, review of market indices,
price levels of current offerings of comparable issues, price
estimates and market data from independent brokers and financial
files.
Net gain (loss) on investments for the years ended Dec. 31 is
summarized as follows:
1994 1993 1992
Fixed maturities $(1,575) $ 20,583 $ 22,075
Mortgage loans (3,013) (25,056) (13,444)
Other investments 306 (2,264) (12,341)
$(4,282) $ (6,737) $ (3,710)
===== ===== =====
Changes in net unrealized appreciation (depreciation) of
investments for the years ended Dec. 31 are summarized as follows:
<PAGE>
PAGE 55
2. Investments (continued)
1994 1993 1992
Fixed maturities:
Held to maturity $(1,329,740) $ -- $ --
Available for sale (720,449) -- --
Investment securities -- 323,060 (128,683)
Equity securities (2,917) (156) 300
The amortized cost, gross unrealized gains and losses and fair
values of investments in fixed maturities and equity securities at
Dec. 31, 1994 are as follows:
<TABLE><CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government
agency obligations $ 21,500 $ 43 $ 4,372 $ 17,171
State and municipal
obligations 9,687 132 -- 9,819
Corporate bonds
and obligations 8,806,707 100,468 459,568 8,447,607
Mortgage-backed
securities 2,431,967 10,630 222,394 2,220,203
$11,269,861 $111,273 $686,334 $10,694,800
======== ======= ======= ========
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
U.S. Government
agency obligations $ 128,093 $ 756 $ 1,517 $ 127,332
State and municipal
obligations 11,008 702 -- 11,710
Corporate bonds
and obligations 1,142,321 24,166 7,478 1,159,009
Mortgage-backed
securities 7,177,706 9,514 467,716 6,719,504
Total fixed maturities 8,459,128 35,138 476,711 8,017,555
Equity securities 4,663 -- 2,757 1,906
$8,463,791 $35,138 $479,468 $8,019,461
======= ======= ======= =======
</TABLE>
The change in net unrealized gain (loss) on available for sale
securities included as a separate component of stockholder's equity
was $(275,822) in 1994.
The amortized cost, gross unrealized gains and losses and fair
values of investments in fixed maturities carried at amortized cost
at Dec. 31, 1993 are as follows:
<TABLE><CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government
agency obligations $ 63,532 $ 3,546 $ 1,377 $ 65,701
State and municipal
obligations 11,072 2,380 -- 13,452
Corporate bonds
and obligations 9,339,297 768,747 22,929 10,085,115
Mortgage-backed
securities 9,978,523 341,067 57,879 10,261,711
$19,392,424 $1,115,740 $ 82,185 $20,425,979
======== ======== ======== ========
/TABLE
<PAGE>
PAGE 56
2. Investments (continued)
At Dec. 31, 1993, net unrealized appreciation on equity securities
included $160 of gross unrealized appreciation, $nil of gross
unrealized depreciation and deferred tax credits of $46. The fair
value of equity securities was $1,900 at December 31, 1993.
The amortized cost and fair value of investments in fixed
maturities at Dec. 31, 1994 by contractual maturity are shown
below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 108,056 $ 109,228
Due from one to five years 1,412,335 1,423,394
Due from five to ten years 5,467,826 5,245,742
Due in more than ten years 1,849,677 1,696,233
Mortgage-backed securities 2,431,967 2,220,203
$11,269,861 $10,694,800
======== ========
Amortized Fair
Available for sale Cost Value
Due from one to five years $ 757,160 $ 756,842
Due from five to ten years 433,717 449,057
Due in more than ten years 90,545 92,152
Mortgage-backed securities 7,177,706 6,719,504
$8,459,128 $8,017,555
======= =======
During the year ended Dec. 31, 1994, fixed maturities classified as
held to maturity were sold with proceeds of $58,001 and gross
realized gains and losses on such sales were $226 and $3,515,
respectively. The sale of these fixed maturities was due to credit
deterioration.
In addition, fixed maturities available for sale were sold during
1994 with proceeds of $374,564 and gross realized gains and losses
on such sales were $1,861 and $7,602, respectively.
Proceeds from sales of investments in fixed maturities during 1993
were $487,983. During 1993, gross gains of $48,499 and gross
losses of $43,039, respectively, were realized on those sales.
At Dec. 31, 1994, bonds carried at $6,536 were on deposit with
various states as required by law.
Net investment income for the years ended Dec. 31 is summarized as
follows:
<PAGE>
PAGE 57
2. Investments (continued)
1994 1993 1992
Interest on fixed maturities $1,556,756 $1,589,802 $1,449,234
Interest on mortgage loans 196,521 175,063 148,693
Other investment income 38,366 29,345 24,281
Interest on cash equivalents 6,872 2,137 5,363
1,798,515 1,796,347 1,627,571
Less investment expenses 16,642 13,128 10,750
$1,781,873 $1,783,219 $1,616,821
======= ======= =======
At Dec. 31, 1994, investments in fixed maturities comprised 87
percent of the Company's total invested assets. These securities
are rated by Moody's and Standard & Poor's (S&P), except for
securities carried at cost approximately $1.7 billion which are
rated by American Express Financial Corporation internal analysts
using criteria similar to Moody's and S&P. A summary of
investments in fixed maturities, at amortized cost, by rating on
Dec. 31 is as follows:
Rating 1994 1993
Aaa/AAA $ 9,708,047 $ 9,959,884
Aa/AA 242,914 258,659
Aa/A 119,952 160,638
A/A 2,567,947 2,021,177
A/BBB 725,755 654,949
Baa/BBB 3,849,188 3,936,366
Baa/BB 796,063 717,606
Below investment grade 1,719,123 1,683,145
$19,728,989 $19,392,424
======== ========
At Dec. 31, 1994, 97 percent of the securities rated Aaa/AAA are
GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of
any other issuer are greater than 1 percent of the Company's total
investments in fixed maturities.
At Dec. 31, 1994, approximately 10.9 percent of the Company's
invested assets were mortgage loans on real estate. Summaries of
mortgage loans by region of the United States and by type of real
estate at Dec. 31, 1994 and 1993 are as follows:
<TABLE><CAPTION>
Dec. 31, 1994 Dec. 31, 1993
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
<S> <C> <C> <C> <C>
East North Central $ 581,142 $ 62,291 $ 552,150 $ 20,933
West North Central 257,996 7,590 361,704 16,746
South Atlantic 597,896 63,010 452,679 52,440
Middle Atlantic 408,940 34,478 260,239 41,090
New England 209,867 23,087 155,214 17,620
Pacific 138,900 -- 120,378 15,492
West South Central 50,854 -- 43,948 525
East South Central 67,503 -- 73,748 --
Mountain 122,668 18,750 70,410 14,594
2,435,766 209,206 2,090,470 179,440
Less allowance for losses 35,252 -- 35,020 --
$2,400,514 $209,206 $2,055,450 $179,440
======= ======= ======= =======<PAGE>
PAGE 58
2. Investments (continued)
Dec. 31, 1994 Dec. 31, 1993
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
Apartments $ 904,012 $ 56,964 $ 744,788 $ 79,153
Department/retail stores 802,522 88,325 624,651 65,402
Office buildings 321,761 21,691 234,042 15,583
Industrial buildings 232,962 18,827 217,648 9,279
Nursing/retirement homes 89,304 4,649 83,768 917
Hotels/motels 32,666 -- 33,138 --
Medical buildings 36,490 15,651 30,429 5,954
Residential 20 -- 78 --
Other 16,029 3,099 121,928 3,152
2,435,766 209,206 2,090,470 179,440
Less allowance for losses 35,252 -- 35,020 --
$2,400,514 $209,206 $2,055,450 $179,440
======= ======= ======= =======
</TABLE>
Mortgage loan fundings are restricted by state insurance regulatory
authorities to 80 percent or less of the market value of the real
estate at the time of origination of the loan. The Company holds
the mortgage document, which gives the right to take possession of
the property if the borrower fails to perform according to the
terms of the agreement. The fair value of the mortgage loans is
determined by a discounted cash flow analysis using mortgage
interest rates currently offered for mortgages of similar
maturities. Commitments to purchase mortgages are made in the
ordinary course of business. The fair value of the mortgage
commitments is $nil.
3. Income taxes
The Company qualifies as a life insurance company for federal
income tax purposes. As such, the Company is subject to the
Internal Revenue Code provisions applicable to life insurance
companies.
Income tax expense consists of the following:
1994 1993 1992
Federal income taxes:
Current $186,508 $180,558 $130,998
Deferred (19,175) (44,237) (30,385)
167,333 136,321 100,613
State income taxes-current 9,010 6,326 4,038
Income tax expense $176,343 $142,647 $104,651
====== ====== ======
Increases (decreases) to the federal tax provision applicable to
pretax income based on the statutory rate are attributable to:
<PAGE>
PAGE 59
3. Income taxes (continued)
<TABLE>
<CAPTION>
1994 1993 1992
Provision Rate Provision Rate Provision Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income
taxes based on
the statutory rate $179,379 35.0% $144,454 35.0% $107,379 34.0%
Increases (decreases)
are attributable to:
Tax-excluded interest
and dividend income (9,939) (2.0) (11,002) (2.7) (8,209) (2.6)
Other, net (2,107) (0.4) 2,869 0.7 1,443 0.4
Federal income taxes $167,333 32.6% $136,321 33.0% $100,613 31.8%
====== === ====== === ====== ===
</TABLE>
A portion of life insurance company income earned prior to 1984 was
not subject to current taxation but was accumulated, for tax
purposes, in a "policyholders' surplus account." At December 31,
1994, the Company had a policyholders' surplus account balance of
$19,032. The policyholders' surplus account is only taxable if
dividends to the stockholder exceed the stockholder's surplus
account or if the Company is liquidated. Deferred income taxes of
$6,661 have not been established because no distributions of such
amounts are contemplated.
Significant components of the Company's deferred tax assets and
liabilities as of Dec. 31 are as follows:
1994 1993
Deferred tax assets:
Policy reserves $533,433 $453,436
Investments 116,736 --
Life insurance guarantee
fund assessment reserve 32,235 35,000
Total deferred tax assets 682,404 488,436
Deferred tax liabilities:
Deferred policy acquisition costs 553,722 509,868
Investments -- 10,151
Other 4,621 12,037
Total deferred tax
liabilities 558,343 532,056
Net deferred tax assets (liabilities) $124,061 $(43,620)
====== ======
The Company is required to establish a "valuation allowance" for
any portion of the deferred tax assets that management believes
will not be realized. In the opinion of management, it is more
likely than not that the Company will realize the benefit of the
deferred tax assets, and, therefore, no such valuation allowance
has been established.
<PAGE>
PAGE 60
4. Stockholder's equity
Retained earnings available for distribution as dividends to the
parent are limited to the Company's surplus as determined in
accordance with accounting practices prescribed by state insurance
regulatory authorities. Statutory unassigned surplus aggregated
$1,020,981 as of December 31, 1994 and $922,246 as of December 31,
1993 (see Note 3 with respect to the income tax effect of certain
distributions). In addition, any dividend distributions in 1995 in
excess of approximately $288,601 would require approval of the
Department of Commerce of the State of Minnesota.
Statutory net income for 1994, 1993 and 1992 and capital and
surplus as of Dec. 31, 1994, 1993 and 1992 are summarized as
follows:
1994 1993 1992
Statutory net income $ 294,699 $ 275,015 $180,296
Statutory capital and surplus 1,261,958 1,157,022 714,942
Dividends paid to American Express Financial Corporation were
$165,000 in 1994, $25,000 in 1993 and $20,000 in 1992.
5. Related party transactions
The Company has loaned funds to American Express Financial
Corporation under three loan agreements. The balance of the first
loan was $40,000 and $75,000 at December 31, 1994 and 1993,
respectively. This loan can be increased to a maximum of $75,000
and pays interest at a rate equal to the preceding month's
effective new money rate for the Company's permanent investments.
It is collateralized by equities valued at $110,034 at December 31,
1994. The second loan was used to fund the construction of the IDS
Operations Center. This loan was paid off during 1994 and had an
outstanding balance of $84,588 at December 31, 1993. The loan was
secured by a first lien on the IDS Operations Center property and
had an interest rate of 9.89 percent. The Company also had a loan
to an affiliate which was used to fund construction of the IDS
Learning Center. This loan was sold to the parent during 1994 and
the balance outstanding was $22,573 at December 31, 1993. The loan
was secured by a first lien on the IDS Learning Center property and
had an interest rate of 9.82 percent. Interest income on the above
loans totaled $2,894, $11,116 and $10,711 in 1994, 1993 and 1992,
respectively.
The Company purchased a five year secured note from an affiliated
company which had an outstanding balance of $23,333 and $27,222 at
December 31, 1994 and 1993, respectively. The note bears a fixed
rate of 8.42 percent. Interest income on the above note totaled
$2,278, $2,605 and $2,278 in 1994, 1993 and 1992, respectively.
The Company has a reinsurance agreement whereby it assumed 100
percent of a block of single premium life insurance business from
an affiliated company. The accompanying consolidated balance sheet
at Dec. 31, 1994 and 1993 includes $765,366 and $759,714,
respectively, of future policy benefits related to this agreement. <PAGE>
PAGE 61
5. Related party transactions (continued)
The accompanying consolidated statement of income includes revenue
from policyholder charges of $8, $21 and $109, and expenses of
$6,912, $4,931 and $5,897 related to this agreement for 1994, 1993
and 1992, respectively.
The Company has a reinsurance agreement to cede 50 percent of its
long-term care insurance business to an affiliated company. The
accompanying consolidated balance sheet at December 31, 1994 and
1993 includes $65,123 and $44,086, respectively, of reinsurance
receivables related to this agreement. Premiums ceded amounted to
$20,360, $16,230 and $12,499 and reinsurance recovered from
reinsurers amounted to $62, $404 and $250 for the years ended Dec.
31, 1994, 1993 and 1992, respectively.
The Company participates in the retirement plan of American Express
Financial Corporation which covers all permanent employees age 21
and over who have met certain employment requirements. The
benefits are based on years of service and the employee's monthly
average of basic annual salary rates in effect on January 1, or
such other date as determined by American Express Financial
Corporation of the highest five consecutive annual salaries of the
last 10
years. American Express Financial Corporation's policy is to fund
retirement plan costs accrued subject to ERISA and federal income
tax considerations. The Company's share of the total net periodic
pension cost was $nil in 1994, 1993 and 1992.
The Company also participates in defined contribution pension plans
of American Express Financial Corporation which cover all employees
who have met certain employment requirements. Company
contributions to the plans are a percent of either each employee's
eligible compensation or basic contributions. Costs of these plans
charged to operations in 1994, 1993 and 1992 were $957, $2,008 and
$1,826, respectively.
The Company participates in defined benefit health care plans of
American Express Financial Corporation that provide health care and
life insurance benefits to retired employees and retired financial
advisors. The plans include participant contributions and service
related eligibility requirements. Upon retirement, such employees
are considered to have been employees of American Express Financial
Corporation. American Express Financial Corporation expenses these
benefits and allocates the expenses to its subsidiaries.
Accordingly, costs of such benefits to the Company are included in
employee compensation and benefits and cannot be identified on a
separate company basis. At Dec. 31, 1994, the total accumulated
post retirement benefit obligation, determined in accordance with
SFAS 106 and based on an assumed interest rate of 8.75 percent and
a health care cost trend rate of 7 percent, has been recorded as a
liability by American Express Financial Corporation.
Charges by American Express Financial Corporation for use of joint
facilities, marketing services and other services aggregated
$335,183, $243,346 and $204,675 for 1994, 1993 and 1992,
respectively. Certain of these costs are included in deferred <PAGE>
PAGE 62
5. Related party transactions (continued)
policy acquisition costs. In addition, the Company rents its home
office space from American Express Financial Corporation on an
annual renewable basis. Such rentals aggregated $965, $4,513 and
$4,074 for 1994, 1993 and 1992, respectively.
6. Commitments and contingencies
At December 31, 1994 and 1993, traditional life insurance and
universal life-type insurance in force aggregated $52,666,567 and
$46,125,515, respectively, of which $3,246,608 and $3,038,426 were
reinsured at the respective year ends. The Company also reinsures
a portion of the risks assumed under disability income policies.
Under the agreements, premiums ceded to reinsurers amounted to
$29,489, $28,276 and $24,222 and reinsurance recovered from
reinsurers amounted to $5,505, $3,345 and $6,766 for the years
ended Dec. 31, 1994, 1993 and 1992.
Reinsurance contracts do not relieve the Company from its primary
obligation to policyholders.
The Company is a defendant in various lawsuits, none of which, in
the opinion of the Company counsel, will result in a material
liability.
The Company settled all remaining IRS audit issues for the tax
years 1984 through 1986 in September of 1994. There was no
material impact as a result of this audit. Also, the IRS is
currently auditing the Company's 1987 through 1989 tax years.
Management does not believe there will be a material impact as a
result of this audit.
7. Lines of credit
The Company has available lines of credit with three banks
aggregating $100,000 at 40 to 80 basis points over the banks' cost
of funds or equal to the prime rate, depending on which line of
credit agreement is used. Borrowings outstanding under these
agreements were $nil and $1,519 at December 31, 1994 and 1993,
respectively.
8. Derivative financial instruments
The Company enters into transactions involving derivative
financial instruments to manage its exposure to interest rate risk,
including hedging specific transactions. The Company manages risks
associated with these instruments as described below. The Company
does not hold derivative instruments for trading purposes.
Market risk is the possibility that the value of the derivative
financial instruments will change due to fluctuations in a factor
from which the instrument derives its value, primarily an interest
rate. The Company is not impacted by market risk related to
derivatives held for non-trading purposes beyond that inherent in
cash market transactions. Derivatives held for purposes other than<PAGE>
PAGE 63
8. Derivative financial instruments (continued)
trading are largely used to manage risk and, therefore, the cash
flow and income effects of the derivatives are inverse to the
effects of the underlying transactions.
Credit risk is the possibility that the counterparty will not
fulfill the terms of the contract. The Company monitors credit
exposure related to derivative financial instruments through
established approval procedures, including setting concentration
limits by counterparty and industry, and requiring collateral,
where appropriate. A vast majority of the Company's counterparties
are rated A or better by Moody's and Standard & Poor's.
The notional or contract amount of a derivative financial
instrument is generally used to calculate the cash flows that are
received or paid over the life of the agreement. Notional amounts
are not recorded on the balance sheet. Notional amounts far exceed
the related credit exposure.
Credit exposure related to interest rate caps is measured by the
replacement cost of the contracts. The replacement cost
represents the fair value of the instruments. Financial futures
contracts are settled in cash daily.
<TABLE><CAPTION>
Notional Carrying Total Credit
Assets Amount Value Fair Value Exposure
<S> <C> <C> <C> <C>
Financial futures contracts $ 159,800 $ 2,072 $ 2,072 $ -
Interest rate caps 4,400,000 29,054 42,365 42,365
$4,559,800 $31,126 $44,437 $42,365
======= ===== ===== =====
</TABLE>
The fair values of derivative financial instruments are based on
market values, dealer quotes or pricing models. The financial
futures contracts expire in 1995. The interest rate caps expire on
various dates from 1995 to 1999.
Financial futures contracts and interest rate caps are used
principally to manage the Company's exposure to rising interest
rates. These instruments are used primarily to protect the margin
between interest rate earned on investments and the interest rate
credited to related annuity contract holders.
Changes in the fair value of financial futures contracts are
accounted for as adjustments to the carrying amount of the hedged
investments and amortized over the remaining lives of such
investments. The cost of interest rate caps is amortized to
interest expense over the life of the contracts and payments
received as a result of these agreements are recorded as a
reduction of interest expense when realized. The amortized cost of
interest rate cap contracts is included in other investments.
9. Fair values of financial instruments
The Company is required to disclose fair value information for most
on- and off-balance sheet financial instruments for which it is<PAGE>
PAGE 64
9. Fair values of financial instruments (continued)
practical to estimate that value. Certain financial instruments
such as life insurance obligations, receivables and all
non-financial instruments, such as deferred acquisition costs are
excluded from required disclosure. Off-balance sheet intangible
assets, such as the value of the field force, are also excluded.
Management believes the value of excluded assets is significant.
The fair value of the Company, therefore, cannot be estimated by
aggregating the amounts presented.
<TABLE><CAPTION>
1994 1993
Carrying Fair Carrying Fair
Financial Assets Value Value Value Value
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $11,269,861 $10,694,800 $ -- $ --
Available for sale 8,017,555 8,017,555 -- --
Investment securities -- -- 19,392,424 20,425,979
Mortgage loans on
real estate (Note 2) 2,400,514 2,342,520 2,055,450 2,125,686
Other:
Equity securities (Note 2) 1,906 1,906 1,900 1,900
Derivative financial
instruments (Note 8) 31,126 44,437 26,923 14,201
Cash and
cash equivalents (Note 1) 267,774 267,774 146,281 146,281
Assets held in segregated
asset accounts (Note 1) 10,881,235 10,881,235 8,991,694 8,991,694
Financial Liabilities
Future policy benefits
for fixed annuities 18,325,870 17,651,897 17,519,876 16,881,747
Liabilities related to
segregated asset accounts 10,398,861 9,943,672 8,645,418 8,305,209
</TABLE>
At December 31, 1994 and 1993, the carrying amount and fair value
of future policy benefits for fixed annuities exclude life
insurance-related contracts carried at $971,897 and $913,127,
respectively, and policy loans of $64,212 and $59,132,
respectively. The fair value of these benefits is based on the
status of the annuities at December 31, 1994 and 1993. The fair
value of deferred annuities is estimated as the carrying amount
less any applicable surrender charges and related loans. The fair
value for annuities in non-life contingent payout status is
estimated as the present value of projected benefit payments at the
rate appropriate for contracts issued in 1994 and 1993.
At December 31, 1994 and 1993 the fair value of liabilities related
to segregated asset accounts is estimated as the carrying amount
less variable insurance contracts carried at $482,374 and $346,276,
respectively, and surrender charges, if applicable.
10. Segment information
The Company's operations consist of two business segments; first,
individual and group life insurance, disability income, health and
long-term care insurance, and second, annuity products designed for<PAGE>
PAGE 65
individuals, pension plans, small businesses and employer-sponsored
groups. The consolidated statement of income for the years ended
Dec. 31, 1994, 1993 and 1992 and total assets at Dec. 31, 1994,
1993 and 1992 by segment are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net investment income:
Life, disability income,
health and long-term
care insurance $ 247,047 $ 250,224 $ 246,676
Annuities 1,534,826 1,532,995 1,370,145
$1,781,873 $1,783,219 $1,616,821
======= ======= =======
Premiums, charges
and fees:
Life, disability income,
health and long-term
care insurance $335,375 $281,284 $250,386
Annuities 193,370 143,876 104,952
$528,745 $425,160 $355,338
====== ====== ======
Income before income taxes:
Life, disability income,
health and long-term
care insurance $122,677 $104,127 $ 96,215
Annuities 394,117 315,336 223,316
Net loss
on investments (4,282) (6,737) (3,710)
$512,512 $412,726 $315,821
====== ====== ======
Total assets:
Life, disability income,
health and long-term
care insurance $ 5,269,188 $ 4,810,145 $ 4,093,778
Annuities 30,478,355 28,247,608 23,201,995
$35,747,543 $33,057,753 $27,295,773
========= ======== ========
</TABLE>
Allocations of net investment income and certain general expenses
are based on various assumptions and estimates.
Assets are not individually identifiable by segment and have been
allocated principally based on the amount of future policy benefits
by segment.
Capital expenditures and depreciation expense are not material, and
consequently, are not reported.
<PAGE>
PAGE 66
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company
We have audited the accompanying consolidated balance sheets of IDS
Life Insurance Company (a wholly owned subsidiary of American
Express Financial Corporation) as of December 31, 1994 and 1993,
and the related consolidated statements of income and cash flows
for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of IDS Life Insurance Company at December 31, 1994 and
1993, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31,
1994, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial
statements, the Company changed its method of accounting for
certain investments in debt and equity securities in 1994.
Ernst & Young LLP
Minneapolis, Minnesota
February 3, 1995
<PAGE>
PAGE 67
About IDS Life
The Group Variable Annuity Contract is issued by IDS Life, a wholly
owned subsidiary of American Express Financial Corporation, which
itself is a wholly owned subsidiary of the American Express
Company, a financial services company headquartered in New York
City.
IDS Life is a stock life insurance company organized in 1957 under
the laws of the State of Minnesota and located at IDS Tower 10,
Minneapolis, MN 55440-0010. We conduct a conventional life
insurance business in the District of Columbia and all states
except New York.
American Express Financial Advisors Inc. offers mutual funds,
investment certificates and a broad range of financial management
services. IDS Life offers insurance and annuities.
American Express Financial Advisors Inc. serves individuals and
businesses through its nationwide network of more than 175 offices
and more than 8000 financial advisors.
<PAGE>
PAGE 68
Other subsidiaries provide investment management and related
services for pension, profit-sharing, employee savings and
endowment funds of businesses and institutions.
Periodic reports
We will send the owner quarterly, or more frequently as the Code
may require, a statement showing the number, type and value of
accumulation units credited to the contract. This statement will
be accurate as of a date not more than two months prior to the date
of mailing. In addition, every person having voting rights will
receive any required reports or prospectuses. We also will send
any statements that may be required by applicable laws, rules and
regulations showing contract restrictions.
Table of contents of the Statement of Additional Information
Performance information....................... 3
Rating agencies............................... 6
Principal underwriter......................... 6
Independent auditors.......................... 6
Mortality and expense risk charge............. 6
Prospectus.................................... 7
Financial statements -
IDS Life Accounts F, IZ, JZ, G, H and N....... 8
___________________________________________________________________
Please check the appropriate box to receive a copy of the Statement
of Additional Information for:
_____ IDS Life Group Variable Annuity Contract
_____ IDS Life Retirement Annuity Mutual Funds
Please return this request to:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440
Your name _______________________________________________________
Address _________________________________________________________
City ______________________ State ______________ Zip ___________
<PAGE>
PAGE 69
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The expenses of the issuance and distribution of the
interests in the Fixed Account of the Contract to be registered,
other than commissions on sales of the Contracts, are to be borne
by the registrant.
Item 14. Indemnification of Directors and Officers
Section 300.083 of Minnesota Law provides in part that a
corporation organized under such law shall have power to indemnify
anyone made, or threatened to be made, a party to a threatened,
pending or completed proceeding, whether civil or criminal,
administrative or investigative, because he is or was a director or
officer of the corporation, or served as a director or officer of
another corporation at the request of the corporation.
Indemnification in such a proceeding may extend to judgments,
penalties, fines and amounts paid in, as well as to reasonable
expenses, including attorneys' fees and disbursements. In a civil
proceeding, there can be no indemnification under the statute,
unless it appears that the person seeking indemnification has acted
in good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the corporation and its
shareholders and unless such person has received no improper
personal benefit; in a criminal proceeding, the person seeking
indemnification must also have no reasonable cause to believe his
conduct was unlawful.
Article IX of the By-laws of the IDS Life Insurance Company
requires the IDS Life Insurance Company to indemnify directors and
officers to the extent indemnification is permitted as stated by
the preceding paragraph, and contains substantially the same
language as the above-mentioned Section 300.083.
Article IX, paragraph (2), of the By-laws of the IDS Life
Insurance Company provides as follows:
"Section 2. The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party, by reason of
the fact that he is or was a director, officer, employee or agent
of this Corporation, or is or was serving at the direction of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
to any threatened, pending or completed action, suit or proceeding,
wherever brought, to the fullest extent permitted by the laws of
the State of Minnesota, as now existing or hereafter amended,
provided that this Article shall not indemnify or protect any such
director, officer, employee or agent against any liability to the
Corporation or its security holders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, or gross
negligence, in the performance of his duties or by reason of his
reckless disregard of his obligations and duties."
<PAGE>
PAGE 70
The parent company of IDS Life Insurance Company maintains an
insurance policy which affords liability coverage to directors and
officers of the IDS Life Insurance Company while acting in that
capacity. IDS Life Insurance Company pays its proportionate share
of the premiums for the policy.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 15. Recent Sales of Unregistered Securities
None
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
3.1 Copy of Certificate of Incorporation of IDS Life Insurance
Company dated July 23, 1957, filed electronically as Exhibit
3.1 to Post-Effective Amendment No. 2 Registration No. 33-
48701 is incorporated herein by reference.
3.2 Copy of By-laws of IDS Life Insurance Company, filed
electronically as Exhibit 3.2 to Post-Effective Amendment No.
2 Registration No. 33-48701 is incorporated herein by
reference.
4.1 Form of Group Deferred Variable Annuity Contract, Form 34660,
filed electronically as Exhibit 4.1 to Post-Effective
Amendment No. 2 Registration No. 33-48701 is incorporated
herein by reference.
5. Opinion of Counsel dated Sept. 14, 1992 regarding legality of
Contracts, filed electronically as Exhibit 5 to Post-
Effective Amendment No. 2 Registration No. 33-48701 is
incorporated herein by reference.
22. Copy of List of Subsidiaries, filed electronically herewith.
<PAGE>
PAGE 71
24. Consent of Independent Auditors, filed electronically
herewith.
25. Power of Attorney dated March 31, 1994, is filed
electronically as Exhibit 25 to Post-Effective Amendment No.
2 Registration No. 33-48701 is incorporated herein by
reference.
(b) Financial Statement Schedules.
27. Schedule I - Consolidated Summary of Investments Other
than Investments in Related Parties
Schedule III - Supplementary Insurance Information
Schedule IV - Reinsurance
Schedule V - Valuation and Qualifying Accounts
Report of Independent Auditors dated February 3, 1995
All other schedules to the consolidated financial statements
required by Article 7 of Regulation S-X are not required
under the related instructions or are inapplicable and,
therefore, have been omitted.
Item 17. Undertakings
Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
<PAGE>
PAGE 72
(4) That it is relying upon the no-action assurance given to
the American Council of Life Insurance (pub. avail. Nov. 28, 1988).
Further, Registrant represents that it has complied with the
provisions of paragraphs (1)-(4) of that no-action letter.
<PAGE>
PAGE 73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, IDS
Life Insurance Company has duly caused this Registration Statement
to be signed on behalf of the Registrant by the undersigned,
thereunto duly authorized in this City of Minneapolis, and State of
Minnesota on the 21st day of April, 1995.
IDS Life Insurance Company
(Registrant)
By IDS Life Insurance Company
By /s/ Richard W. Kling
Richard W. Kling
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities indicated on the 21st day of April, 1995.
Signature Title
/s/ James A. Mitchell* Chairman of the Board
James A. Mitchell and Chief Executive
Officer
/s/ Richard W. Kling* Director and President
Richard W. Kling
/s/ Louis C. Fornetti* Director
Louis C. Fornetti
/s/ David R. Hubers* Director
David R. Hubers
/s/ Paul F. Kolkman* Director and Executive Vice
Paul F. Kolkman President
/s/ Peter A. Lefferts* Director and Executive Vice
Peter A. Lefferts President, Marketing
/s/ Janis E. Miller* Director and Executive Vice
Janis E. Miller President, Variable Assets
/s/ Barry J. Murphy* Director and Executive Vice
Barry J. Murphy President, Client Service
<PAGE>
PAGE 74
/s/ Stuart A. Sedlacek* Director and Executive Vice
Stuart A. Sedlacek President, Assured Assets
/s/ Melinda S. Urion* Director, Exective Vice
Melinda S. Urion President and Controller
* Signed pursuant to Power of Attorney dated March 31, 1994, filed
electronically as Exhibit 25 to Post-Effective Amendment No. 2
Registration No. 33-48701 is incorporated herein by reference.
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
PAGE 1
IDS LIFE INSURANCE COMPANY (GVAC)
Registration Number 33-48701
EXHIBIT INDEX
22. Copy of List of Subsidiaries
24. Consent of Independent Auditors
27. Financial Statements Schedules/Report of Independent Auditors
<PAGE>
PAGE 1
LIST OF SUBSIDIARIES
o American Centurion Life Insurance Company
o American Enterprise Life Insurance Company
o American Partners Life Insurance Company
o IDS Life Insurance Company of New York
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our reports dated February 3, 1995 on the
consolidated financial statements and financial statement schedules
of IDS Life Insurance Comapny in Post-Effective Amendment No. 4 to
the Registration Statement (Form S-1 No. 33-48701) being filed
under the Securities Act of 1933 for the registration of the Group
Variable Annuity Contracts to be offered by IDS Life Insurance
Company.
Minneapolis, Minnesota
April 20, 1995
<PAGE>
PAGE 1
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE I - CONSOLIDATED SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands)
AS OF DECEMBER 31, 1994
Column A Column B Column C Column D
Type of Investment Cost Value Amount at which
shown in the
balance sheet
<S> <C> <C> <C>
Fixed maturities:
Held to maturity:
United States Government and
government agencies and
authorities (a) $ 1,301,547 $ 1,177,730 $ 1,301,547
States, municipalities and
polictical subdivisions 9,687 9,819 9,687
All other corporate bonds 9,958,627 9,507,251 9,958,627
Total held to maturity 11,269,861 10,694,800 11,269,861
Available for sale:
United States Government and
government agencies and
authorities (b) 3,783,176 3,514,514 3,514,514
States, municipalities and
polictical subdivisions 11,008 11,710 11,710
All other corporate bonds 4,664,944 4,491,331 4,491,331
Total available for sale 8,459,128 8,017,555 8,017,555
Mortgage loans on real estate 2,400,514 XXXXXXXXX 2,400,514
Policy loans 381,912 XXXXXXXXX 381,912
Other investments 51,795 XXXXXXXXX 51,795
Total investments $22,563,210 $ XXXXXXXXX $22,121,637
(a) - Includes mortgage-backed securities with a cost and market value of $1,280,047 and $1,160,559, respectively.
(b) - Includes mortgage-backed securities with a cost and market value of $3,655,083 and $3,387,182, respectively.
</TABLE>
<PAGE>
PAGE 2
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1994
Column A Column B Column C Column D Column E Column F Column G
Segment Deferred Future Unearned Other policy Premium Net
policy policy premiums claims and revenue investment
acquisition benefits, benefits income
cost losses, payable
claims and
loss
expenses
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Annuities $1,150,585 $19,361,979 $ - $23,888 $ - $1,534,826
Life, DI,
Long-term Care and
Health Insurance 714,739 3,346,931 - 26,180 144,640 247,047
_____________________________________________________________________________________________________________________________
Total $1,865,324 $22,708,910 $ - $50,068 $144,640 $1,781,873
_____________________________________________________________________________________________________________________________
Column H Column I Column J Column K
Benefits, Amortization Other Premiums
claims, of deferred operating written
losses and policy expenses
settlement acquisition
expenses costs
_____________________________________________________________________________________________________________________________
Annuities $ (5,762) $ 194,060 $131,515 N/A
Life, DI,
Long-term Care and
Health Insurance 134,128 86,312 78,586 N/A
_____________________________________________________________________________________________________________________________
Total $ 128,366 $ 280,372 $210,101 N/A
_____________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 3
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1993
Column A Column B Column C Column D Column E Column F Column G
Segment Deferred Future Unearned Other policy Premium Net
policy policy premiums claims and revenue investment
acquisition benefits, benefits income
cost losses, payable
claims and
loss
expenses
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Annuities $1,008,378 $18,492,135 $ - $21,508 $ - $1,532,995
Life, DI,
Long-term Care and
Health Insurance 644,006 3,148,932 - 23,008 127,245 250,22
_____________________________________________________________________________________________________________________________
Total $1,652,384 $21,641,067 $ - $44,516 $127,245 $1,783,219
_____________________________________________________________________________________________________________________________
Column H Column I Column J Column K
Benefits, Amortization Other Premiums
claims, of deferred operating written
losses and policy expenses
settlement acquisition
expenses costs
_____________________________________________________________________________________________________________________________
Annuities $ 3,656 $ 139,602 $122,999 N/A
Life, DI,
Long-term Care and
Health Insurance 119,335 72,131 118,975 N/A
_____________________________________________________________________________________________________________________________
Total $ 122,991 $ 211,733 $241,974 N/A
_____________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 4
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1992
Column A Column B Column C Column D Column E Column F Column G
Segment Deferred Future Unearned Other policy Premium Net
policy policy premiums claims and revenue investment
acquisition benefits, benefits income
cost losses, payable
claims and
loss
expenses
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Annuities $ 860,027 $16,342,419 $ - $28,705 $ - $1,370,145
Life, DI,
Long-term Care and
Health Insurance 580,848 2,883,469 - 21,194 114,379 246,676
_____________________________________________________________________________________________________________________________
Total $1,440,875 $19,225,888 $ - $49,899 $114,379 $1,616,821
_____________________________________________________________________________________________________________________________
Column H Column I Column J Column K
Benefits, Amortization Other Premiums
claims, of deferred operating written
losses and policy expenses
settlement acquisition
expenses costs
_____________________________________________________________________________________________________________________________
Annuities $ 1,870 $ 81,706 $100,928 N/A
Life, DI,
Long-term Care and
Health Insurance 106,528 58,453 114,764 N/A
_____________________________________________________________________________________________________________________________
Total $ 108,398 $ 140,159 $215,692 N/A
_____________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 5
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE IV - REINSURANCE ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Column A Column B Column C Column D Column E Column F
Gross amount Ceded to other Assumed from Net % of amount
companies other companies Amount assumed to net
______________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1994
Life insurance in force $50,814,651 $3,246,608 $1,851,916 $49,419,959 3.75%
______________________________________________________________________________________________________________
Premiums:
Life insurance $ 51,219 $ 3,354 $ 319 $ 48,184 0.66%
DI & health insurance 114,049 17,593 -- 96,456 0.00%
Total premiums $ 165,268 $ 20,947 $ 319 $ 144,640 0.22%
______________________________________________________________________________________________________________
For the year ended
December 31, 1993
Life insurance in force $44,188,493 $3,038,426 $1,937,022 $43,087,089 4.50%
______________________________________________________________________________________________________________
Premiums:
Life insurance $ 51,764 $ 3,627 $ -- $ 48,137 0.00%
DI & health insurance 96,250 17,142 -- 79,108 0.00%
Total premiums $ 148,014 $ 20,769 $ -- $ 127,245 0.00%
______________________________________________________________________________________________________________
For the year ended
December 31, 1992
Life insurance in force $38,888,963 $2,937,590 $2,015,382 $37,966,755 5.31%
______________________________________________________________________________________________________________
Premiums:
Life insurance $ 53,238 $ 3,849 $ 330 $ 49,719 0.66%
DI & health insurance 78,347 13,687 -- 64,660 0.00%
Total premiums $ 131,585 $ 17,536 $ 330 $ 114,379 0.29%
______________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 6
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Column A Column B Column C Column D Column E
Additions
---------
Balance at Charged to
Description Beginning Charged to Other Accounts- Deductions- Balance at End
of Period Costs & Expenses Describe * Describe ** of Period
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1994
- -----------------------------
Reserve for Mortgage Loans $35,020 $232 $ 0 $ 0 $35,252
Reserve for Fixed Maturities $22,777 ($16,777) $ 0 $6,000 $ 0
Reserve for Other Investments $10,700 ($3,185) $ 0 $ 0 $ 7,515
For the year ended
December 31, 1993
- -----------------------------
Reserve for Mortgage Loans $23,595 $13,635 $ 0 $2,210 $35,020
Reserve for Fixed Maturities $37,899 ($15,122) $ 0 $22,777
Reserve for Other Investments $12,834 ($4,344) $ 0 ($2,210) $10,700
For the year ended
December 31, 1992
- ------------------------------
Reserve for Mortgage Loans $16,131 $8,440 $ 0 $976 $23,595
Reserve for Fixed Maturities $45,100 ($7,601) $400 $ 0 $37,899
Reserve for Other Investments $ 7,782 $4,076 $ 0 ($976) $12,834
* Cash received on bond previously written down.
** 1994 amount represents a direct writedown of the related investments in fixed maturities. 1993 and 1992 amounts represent
transfers between reserve accounts.
</TABLE>
<PAGE>
PAGE 7
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company
We have audited the consolidated financial statements of IDS Life
Insurance Company as of December 31, 1994 and 1993, and for each of
the three years in the period ended December 31, 1994, and have
issued our report thereon dated February 3, 1995 (included
elsewhere in this Registration Statement).
Our audits also included the financial statements schedules I, III,
IV and V included elsewhere in this Registration Statement. These
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
Ernst & Young LLP
Minneapolis, Minnesota
February 3, 1995
